“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 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.”
The nomination immediately drew rebuke from progressive groups, which have been critical of Trump's track record of nominating Wall Street insiders for high-level positions, despite being critical of the industry during the presidential campaign. Trump has nominated Steven Mnuchin, a 17-year veteran of Goldman Sachs, to be Treasury secretary, and Stephen K. Bannon, Trump’s chief strategist, worked on mergers and acquisition deals for the bank. Last month, Trump said he would appoint Gary Cohn, Goldman Sachs' president and chief operating officer, to lead the powerful National Economic Council.
Clayton worked with Goldman Sachs during the financial crisis, including when billionaire investor Warren E. Buffett pumped $5 billion into the bank.
“Trump supporters did not vote to let the fox guard the henhouse on Wall Street,” Adam Green, co-founder for the Progressive Change Campaign Committee, said in a statement. Rep. Maxine Waters (D-Calif.), ranking member of the House Financial Services Committee, said, “This nomination of a Wall Street insider to regulate Wall Street proves that Donald Trump has no intention of getting tough on Wall Street.”
If confirmed by the Senate, Clayton would replace Mary Jo White, who announced shortly after the election that she will step down.
White, a former federal prosecutor, is known for a no-nonsense style and beefed up the agency’s enforcement efforts over the past three years, pushing for more companies to admit guilt and taking more cases to trial. And during her term, the SEC has been a central player of the Obama administration’s effort to rein in big banks following the 2008 financial crisis and prevent future taxpayer bailouts of the industry. The agency has pushed for more oversight of hedge funds and other asset managers and has established rules that make it more difficult for big banks to make risky bets on the markets.
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“The nomination of Mr. Clayton to head the SEC underscores the shift away from enforcement,” Isaac Boltansky of Compass Point Research & Trading said in a research note Wednesday.
Clayton, in a statement, said that he would work “with key stakeholders in the financial system to make sure we provide investors and our companies with the confidence to invest together in America. We will carefully monitor our financial sector, as we set policy that encourages American companies to do what they do best: create jobs.”
Clayton is a partner at Sullivan & Cromwell, a well-known law firm, and has represented some of the biggest names on Wall Street, including Goldman Sachs, and helped them weather regulatory scrutiny. He also has helped large companies raise money through an initial public offering, including Alibaba, a Chinese retail giant that held one of the largest IPOs in history. But, according to the biography on the Sullivan & Cromwell website, Clayton has not held any government positions and has never served as a prosecutor.
“Mr. Clayton's background is as a Wall Street defense lawyer — and while that's hardly unprecedented in these kind of nominations, we believe it's not the appropriate background for a top position policing Wall Street,” said Marcus Stanley, policy director for Americans for Financial Reform. “We look forward to tough questioning from the Senate regarding his positions on specific issues.”
His nomination also drew a quick Twitter response from Hillary Clinton's former campaign deputy press secretary.
Criticism of Clayton's connections to Wall Street are unwarranted, said Bill McLucas, a securities lawyer with WilmerHale, who spent eight years as SEC enforcement chief. “His reputation is he is incredibly smart, incredibly talented and with deep experience in corporate governance,” he said. “It is a mistake to think lawyers that have labored in this area are somehow tainted in their judgment.”
In addition to replacing White, Trump will be able to fill two openings on the five-member SEC commission. Also, Thomas Curry, the head of the Office of the Comptroller of the Currency, another important Wall Street regulator, has less than six months on his term and Timothy Massad, chairman of the Commodity Futures Trading Commission, announced this week that he will step down. Together, the openings should give the Trump administration wide latitude to change the way Wall Street is regulated.