Rod Lamkey/Pool via AP
At a House hearing on Thursday, Clayton made clear he still intends to seek the SDNY U.S. attorney position.
This week, any doubts about the politicization of the Justice Department under Attorney General William Barr were extinguished. At a House Judiciary Committee hearing on Wednesday, one department whistleblower described how Barr intervened to get a more favorable sentencing recommendation for Donald Trump ally Roger Stone. A second whistleblower detailed an auto industry antitrust investigation initiated after an angry Trump tweet, and several investigations into for-profit cannabis companies launched because Barr considers marijuana immoral. (If you had Bill Barr and not Jeff Sessions in the category of “most likely to crack down on pot due to personal animus,” you should try your luck in Vegas.)
The hearing didn’t even consider the biggest DOJ meddling of the week: Barr’s attempt to fire the U.S. attorney for the Southern District of New York (SDNY), Geoffrey Berman, who was helming several investigations into the Trump Organization and the president’s numerous allies, including personal lawyer Rudy Giuliani. Berman initially refused to resign, so Barr was compelled to have Trump fire him, a legal but ethically sketchy maneuver. The whole affair, like so many before it, demonstrated how omertà is the code that guides government under Trump and Barr.
The whole affair, like so many before it, demonstrated how omertà is the code that guides government under Trump and Barr.
Barr released a letter to Berman dated June 20, detailing how he’d offered Berman at least two alternative positions, assistant attorney general for the Civil Division and chairman of the Securities and Exchange Commission (SEC), in exchange for giving up the SDNY slot. Left unsaid was that Barr, as attorney general, has no authority to fire a U.S. attorney, or offer them an administration position. And the reason he wanted Berman elsewhere was that any investigations of Trump associates had to be immediately squelched.
But one passage stood out. “As we discussed,” Barr wrote, “I wanted the opportunity to choose a distinguished New York lawyer, Jay Clayton, to nominate as United States Attorney and was hoping for your cooperation to facilitate a smooth transition.” Clayton currently serves as chair of the SEC, the job Berman was apparently offered in a Freaky Friday–style switcheroo.
At a House hearing on Thursday, Clayton made clear he still intends to seek the SDNY U.S. attorney position. Until Thursday, this was not something that regulatory officials did, at least not in public. “It is a serious violation of a tradition of independence at the SEC to be asking for a job while still in the job,” said Barbara Roper of the Consumer Federation of America.
Why would someone with no prosecutorial experience want to become a federal prosecutor? And why would the Trump administration specifically select Clayton, and not someone else from their gallery of rogues?
The “distinguished New York lawyer” phrase answers a lot of these questions. That honorific carries a specific meaning: He’s an elite Wall Street attorney who bounces seamlessly back and forth between government and defending corporations—a man with all the right contacts and relationships. All roads for such distinguished New York lawyers lead to the SDNY, a capstone for decades of service.
That was true of Mary Jo White, U.S. attorney for SDNY from 1993 to 2002, and later chair of the SEC. In between, she ran the litigation department at Debevoise & Plimpton, a white-shoe law firm, to which she returned after her SEC tenure ended. She was last seen defending the Sackler family, whose company created OxyContin, from opioid lawsuits.
Clayton has essentially the same trajectory. It’s weird to see him framed in the press as a “low-profile regulator” helplessly caught in a “political minefield.” He was a career climber at Sullivan & Cromwell, another big-time corporate law firm, representing mostly big banks, like Goldman Sachs and Deutsche Bank (both of which have ties to the Trump administration and Trump personally; Deutsche was Trump’s personal banker). He asked Trump and Barr for the SDNY job specifically, saying it would bring him closer to home. (The SEC is based in Washington.) In reality, SDNY was the missing item on his résumé, the thing that will burnish his stature and raise his billable hour rate in the private sector.
At the SEC, Clayton has been a reliable voice for Wall Street deregulation, with a notable new win: The Volcker Rule prohibiting banks from risky gambling with depositor money was gutted Thursday, and Clayton had a hand in that. Were he to become the top federal prosecutor in Manhattan, the leaders of the nation’s financial industry could breathe easy. Clayton was outside counsel to Goldman during the odious 1MDB scandal, when the vampire squid fleeced the country of Malaysia and facilitated the wholesale theft of billions of dollars. At SDNY, Clayton could be trusted to do little on this issue or anything like it.
Trump would probably breathe easier as well; Clayton is his golfing buddy.
Trump would probably breathe easier as well; Clayton is his golfing buddy. At a House Financial Services Committee hearing Thursday, Rep. Katie Porter (D-CA) asked Clayton how many times the two had golfed together. Clayton said he didn’t want to get into it. “Is it a large number and you have trouble coming up with it?” Porter asked.
But while that was a hilarious line, Clayton, like most distinguished New York lawyers, fraternizes with both parties, corporatists on both left and right. Mary Jo White was President Obama’s SEC chair; Clayton is Trump’s. Yet they are ideologically rather similar. Annette Nazareth, another New York lawyer who served at the SEC as a Democrat, is a Clayton friend. Clayton was a donor to New York Sen. Chuck Schumer, because that’s what distinguished New York lawyers do.
Unfortunately, that relationship will not be nearly enough to get Clayton through the political controversy he’s put himself in. While an equal-opportunity flatterer like Clayton may have been tapped to avoid a partisan fight, he’s now feeling pressure from both parties. Sen. Lindsey Graham (R-SC), who chairs the Senate Judiciary Committee, has said he wouldn’t move forward on an SDNY pick unless New York’s two senators, Schumer and Kirsten Gillibrand, return a “blue slip” approving of the nominee. Both senators indicated they wouldn’t blue-slip Clayton, and called on him to withdraw his nomination. Some of Clayton’s own advisers have urged him to do the same.
But there was no evidence of Clayton backing down on Thursday. “I am fully committed to my work at the SEC,” Clayton told the House Financial Services Committee, but he declined to withdraw from consideration for the SDNY post. “I don’t think that matter requires my attention at this time … this is not the time to decide about the nomination,” Clayton said. Asked if it would be a conflict to take SEC actions while his nomination is pending, he said he would “pursue all matters with independence” and consult with ethics officers where appropriate.
There are several interesting parts to this. First, there’s the reticence of Republicans—no shrinking violets—to jam through Clayton. My sources indicate that many in the GOP are dismayed that he hasn’t completed the deregulatory rulemakings still pending at the SEC. They include a rule to expand how firms can raise money from less-sophisticated small investors in private markets. “I imagine there are those at the Chamber of Commerce and elsewhere in the business community who are very anxious for him to remain at the SEC long enough to push through their wish list of deregulatory changes,” said Roper.
Indeed, the House hearing featured several Republicans pressuring Clayton, asking for status updates to various rulemakings. Rep. Patrick McHenry (R-NC), ranking Republican on the Financial Services Committee, noted one reform that he said was “due for decades.” Clayton bent over backwards to assure them he’d finish all his rulemakings.
Clayton’s surprising refusal to withdraw despite what seems like a brick wall against him among Senate Democrats now critical to his nomination is also confounding. Sen. Schumer’s office said they had not received any outreach from the administration or Sen. Graham on the nomination. Democrats would encounter a political shitstorm if they gave Clayton this slot after the Saturday Night Massacre style in which it was delivered, even if he has an aura of bipartisan independence.
Clayton’s departure from the SEC would likely only make things worse. While he has been a reliable and partisan deregulator, he did occasionally ally with Democrats on the commission on enforcement matters, and against Republican commissioners Hester Peirce and Elad Roisman, both former staffers of Sen. Richard Shelby (R-AL), a fraternity seeded throughout banking regulatory circles and known as the “Shelby mafia.”
If Clayton left, Peirce, who was recently renominated to a new term, could grab the chairmanship, with another anti-regulatory drone added to the roster. That would have worsened an already inert enforcement posture at the commission. In addition, the reshuffling could have extended the Trump administration practice of filling up independent commissions with Republicans while leaving the Democratic seats vacant.
But that dream has all but died, and it’s Clayton’s fault as much as anyone’s. Schumer has been framing this as if Clayton was caught in a political trap. But by publicly angling to become the Trump buddy with the power to end in-progress investigations of all things Trump, Clayton set that trap himself.
