What on earth is Jay Clayton doing as chairman of the Securities and Exchanges Commission (SEC)? Why is he a commissioner at all?
He has no experience in public service, has no party affiliation being an independent, and his experience includes advising past clients like Goldman Sachs, Morgan Stanley, Lehman Brothers, Deutsche Bank, UBS, SoftBank Group, and plenty of other banks which have paid him millions ($7.6 million just in 2016) for advice yet now he is meant to oversee.
Moreover his substantial wealth has investments in things like Apollo Global Management, Bain Capital and J.C. Flowers & Co., all three specializing in private equity.
As you may be aware, SEC prohibits individuals from investing in startups or private equity, unless they are rich of course like Clayton. Thus we hear him say the rules are all fine, presumably because they fatten his pockets, but the rules are not fine at all.
Initial Public Offerings (IPOs) are at decades lows. New business start-ups are down. The skyscrapers of America have turned grey and its airports have descended into third world standards, as Trump says, and the reason is partly because children require permission to sell lemonade.
Children! Red tape suffocates every part of the “free land,” red tape which Trump said he will get rid off, he will drain the swamp, yet Clayton is the embodiment of the swamp.
His past experience can not possibly allow him to have an independent view of what action SEC should take, for serve enough certain clients and you start taking their world view.
A worldview which is focused on maintaining their privileges, with any innovation or disruption seen as a threat. Yet it is innovation that has made America great, not those trying to rig the system for their own gain.
SEC “chairman is selected by and serves at the pleasure of the President,” a district court said recently. We think the selection of Clayton as chairman was a mistake, one of many we must say of Trump’s initial appointments.
Trump is a great businessman and as we’ve seen with North Korea he is fairly good at making deals, but he is not a politician, and doesn’t really have experience of public administration.
Mistakes, therefore, are expected, as long as he learns from them and rectifies them. Clayton was a mistake because he is not really promoting capital formation, he is not really promoting American businesses, he is not promoting entrepreneurship, and he is probably wondering how on earth did he get to be a Commissioner when he has no relevant experience in running such important department.
In contrast, Hester Peirce can give America what it needs. She says SEC is not there to give out permission slips or to analyze the merits of underlying products, but to foster capital formation, competition, efficiency, and of course to protect investors.
She should be chair because she has experience of policy matters and seems to understand how this affects established and new markets which are creating prosperity, while Clayton seems to be a pen pusher with no apparent aim, and his very standing at the commission, given his background, gives weight to criticisms of revolving doors, sophisticated political corruption and so on.
The SEC is there to serve the public, not to be masters of it and order good men and women around with requirements for application forms to sell lemonade.
The appointment of Peirce as chair would go some way towards addressing many concerns this space and businesses more generally have in regards to SEC which is seeing a considerable decline in capital formation, but that would be just the first step.
Trump promised removal of two regulations for every new one. SEC’s extension of the Securities Act to tokens means books and books of laws have to be removed for him to keep his promise.
Which we doubt he will, but the focus is on stopping the SEC from causing more harm before we can dream of rolling back some of the harm to capital formation they’ve already caused.
That means Trump needs to get on with appointing new commissioners. He can appoint three Republicans at the max. Currently there is only one, Peirce.
If she takes the chair, Clayton would be just another independent commissioner who no one cares about. In addition, a commissioner position is open, so that can be a Republican, and one commissioner’s term has expired, so that can be a Republican too.
Then there would be five commissioners, three republicans, one democrat and one independent with Peirce hopefully chairing.
At that point they can start addressing the many concerns tech companies, businesses in general, and this space, has with the very old rules and regulations that SEC needlessly imposes, which are considerably affecting the dynamism of America’s real economy, as opposed to the debt fueled, asset bubbles, feel good for a second, Wall Street economy.