In this week’s roundup, we look at the Securities and Exchange Commission, where Chairman Jay Clayton will be stepping down after more than three and a half years at the agency—and could draw a close to the deregulatory trajectory undertaken since he started in 2017. We also examine some of President-elect Joseph Biden’s economic agenda, which could include tighter restrictions on finance, including private equity. However, Biden also came out in favor this week of a large stimulus package.
SEC Chairman Announces Resignation
- The Securities and Exchange Commission announced Monday that its current chairman, Jay Clayton, will resign after serving for more than three and a half years at the agency.
- Clayton’s term wouldn’t have expired until June 5, 2021, but it’s a tradition for SEC leaders to step down during presidential transitions. Clayton will leave the agency before the end of the year. [Law 360, Tom Zanki]
- Clayton was nominated to serve as SEC chairman by President Trump in January 2017, and was sworn in the following May.
- Under Clayton’s leadership, the SEC undertook a broad deregulatory agenda, including overhauling the Volcker Rule and expanding the accredited investor definition. An incoming Biden appointee could signal a reversal of the deregulatory trajectory of the SEC established by Clayton.
- It’s unclear who will replace Clayton, a political independent, as head of the SEC. By law, there can be no more than two commissioners from each political party. Currently, two Republicans and two Democrats serve as commissioners, making the next pick an independent almost certain.
- In June, U.S. Attorney General William Barr selected Clayton to serve as the chief attorney for the Southern District of New York, an office that is currently vacant.
- Comprising most of New York City, the Southern District of New York is pivotal to the enforcement of financial and securities law in the federal court system.
- However, it’s unclear if Barr will still appoint Clayton to the position in the remaining weeks of the Trump administration.
Biden Administration Could Bring Tighter Financial Oversight
- After a drawn-out election process, Joseph Biden and his running mate Kamala Harris are the presumptive winners of the 2020 presidential campaign, and their team is gearing up for tighter regulatory oversight for the financial industry, including private equity.
- Despite no concession from President Donald Trump or his campaign, Biden’s transition team is outlining his future policy agenda. The team includes former members of the Commodity Futures Trading Commission, the Consumer Financial Protection Bureau and other financial reform advocacy groups who are looking to reverse the deregulatory streak begun under the Trump administration.
- Barring any surprise court decisions or protest vote by “faithless” electors in December that could overturn the results of the election, Biden will take office in January 2021, and he’s currently assembling his cabinet.
- Picks for Biden’s Treasury Secretary include former presidential candidate and current Senator Elizabeth Warren, D-Mass. [The New York Times, Sydney Ember]
- Other sources have named Lael Brainard, the lone Democrat on the Federal Reserve’s Board of Governors, for the position. [The Guardian, Oliver Milman]
- In June 2019, Warren and other lawmakers authored a bill called “Stop Wall Street Looting Act” that includes stricter regulation for the private equity industry. While the bill has not gained traction in either legislative chamber and would face a steep hurdle from the Republican-controlled Senate, a Biden administration could still take a strong stance against private equity across the executive branch.
- Barbara Roper, director of investor protection for the Consumer Federation of America, said a Biden administration could reverse Trump administration rules that benefited private equity, including a rule from the Department of Labor in June that allows private equity investments in 401(k) retirement plans. [The New York Times, Alan Rappeport and Jeanna Smialek]
- In a statement delivered before a hearing on Nov. 12, Chairwoman of the House Financial Services Committee Maxine Waters, D-Calif., said she would be working closely with the Biden administration to roll back rules that have weakened financial requirements.
Biden Supports HEROES Act for Next Stimulus Package
- During a press conference on Monday, President-elect Joseph Biden outlined his economic agenda, which included endorsing a multi-trillion stimulus package proposed earlier this year.
- Biden said he would pass the HEROES Act, a $2.4 trillion federal aid package proposed by the House in May, if it came across his desk.
- The bill includes a more than $500 billion bailout for states and local municipalities whose budgets have been hit, and hundreds of billions more earmarked for increased unemployment payouts, individual lump-sum payments and expanded assistance for renters, homeowners and businesses—according to estimates from the Congressional Budget Office.
- However, Biden will likely have to trim down the proposal if it’s to survive the Senate, which is expected to remain in control of Republicans.
- Read more about Biden’s endorsement of the HEROEs Act here.
Trump’s Fed Pick Fails in Senate Vote
- Judy Shelton’s nomination to fill one of two remaining open seats on the Federal Reserve’s Board of Governors failed to advance to a final vote on Tuesday, a significant setback but one that does not kill her chances at ultimately winning confirmation. [The New York Times, Jeanna Smialek and Emily Cochrane]
- Shelton was nominated in January and the Banking Committee approved her in July. But Republicans Mitt Romney, Susan Collins and Lamar Alexander oppose her. [The Wall Street Journal, The Editorial Board]
- Shelton drew criticism for her views on the gold standard and Fed independence among other things. [CNBC, Jeff Cox]
- Shelton was nominated alongside Christopher Waller, an economist at the Federal Reserve Bank of St. Louis. Waller has bipartisan support, and his term would run into 2030 if he’s confirmed. [Roll Call, Jim Saksa, Ellyn Ferguson, and Mary Ellen McIntire]
Benjamin Glick is Middle Market Growth’s associate editor.