January 4, 2017

Goldman Scores Inside Straight With SEC Chair Pick

by Breakingviews

Among Hillary Clinton’s alleged sins were close ties with Goldman Sachs. So it’s ironic that the Wall Street firm has been the biggest corporate winner of Donald Trump’s many cabinet appointments. Jay Clayton, a Goldman go-to attorney, was tapped Wednesday to head the Securities and Exchange Commission. If the President-elect means what he says about deregulating the money business, it’s hard to imagine a better choice.

Clayton’s employer, Sullivan & Cromwell, is virtually the house legal arm of Goldman. The firm ranked a clear first as legal advisor on deals that Goldman was involved in between 2006 and 2016, working on $2.9 trillion of global M&A deals as well as $152 billion of debt and equity issues on which Goldman was the sole bookrunner, according to Thomson Reuters data. Among those deals he worked on Alibaba’s record $25 billion IPO in 2014.

What really stands out is Clayton’s crisis-era work on behalf of banks. He advised on two pivotal rescues: Bear Stearns’ sale to JPMorgan and Barclays Capital’s fire-sale purchase of Lehman Brothers’ assets out of bankruptcy. He also worked with Goldman on the two big capital injections that helped it sail through the crisis, from Warren Buffett’s Berkshire Hathaway ($5 billion) and the Treasury’s controversial TARP program ($10 billion).

Clayton’s regulatory work had to be attractive for Trump, who said he wants his appointee to undo regulations that have stifled corporate investment. Clayton advised Ally Financial on its participation in a signature post-crisis settlement: a $25 billion deal with regulators over alleged mortgage servicing and foreclosure abuses.

Additionally, Clayton co-wrote a brief for the New York City Bar in 2011 arguing that the Foreign Corrupt Practices Act imposed an unfair burden on U.S. companies given lax global treatment of corruption. Clayton could put his merger advisory skills to work and merge his agency with the Commodity Futures Trading Commission.

Eight years ago, the Obama administration pulled H. Rodgin Cohen, Sullivan & Cromwell’s senior partner, from consideration for a Treasury post because his Wall Street ties made him politically toxic. Trump, who promised to “drain the swamp,” has no such qualms.

Clayton joins nominees that include ex-Goldman bankers Steven Mnuchin at Treasury, Gary Cohn as chief economic adviser and Stephen Bannon as senior counselor, as well as distressed-debt investor Wilbur Ross at Commerce and hedge-fund billionaire Carl Icahn as special advisor. Hope and change has given way to plus ca change.

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