Senators shouldn’t go easy on Trump’s nominee to lead the SEC. Here are some things they ought to ask him about.
Donald Trump nominated Paul Atkins to lead the Securities and Exchange Commission (SEC) back in December. As of March 19, Atkins’ confirmation hearing has not yet been scheduled. Writing about the delay earlier this month, Semafor’s Eleanor Mueller reported that “the White House still hasn’t produced the paperwork needed for the Senate to schedule his confirmation hearing.”
On Monday, Mueller noted that Senate Banking Chair Tim Scott (R-SC) is “eyeing” March 27 for a hearing date, though she added that there is still “no clarity yet on whether the committee has Atkins’ paperwork in hand.”
If and when Atkins’ hearing happens, here are some tough questions that senators should ask him, broken down by topic.
Deregulation/Financial Stability
As an SEC Commissioner from 2002 to 2008, you were part of a Republican majority at the agency in the lead-up to the global financial crisis. If confirmed as SEC Chair, you and two of your former clerks, Commissioners Hester Peirce And Mark Uyeda, would constitute another Republican majority at the agency.
The 2010 Dodd-Frank Wall Street Reform And Consumer Protection Act was passed to address the 2008 financial crisis and prevent future ones. However, when testifying about Dodd-Frank before Congress in 2015, you argued that it is “naïve, egotistical, and simply wishful thinking” to “suggest that the government can control human action.”
- Are financial crises inevitable?
- Would you prioritize your ideological commitment to deregulation even if it leads to riskier markets, which are more prone to financial crises?
During your anti-Dodd Frank testimony, you claimed that the Financial Stability Oversight Council’s authority to designate entities within the financial services industry as systemically important financial institutions (SIFIs) was “dangerous.”
- If you are confirmed as SEC Chair and thus become a voting member on FSOC, would you vote against new SIFI designations?
During your anti-Dodd Frank testimony, you were critical of the SEC’s authority to require a uniform fiduciary duty for investment advisers and broker-dealers.
- Why shouldn’t the SEC protect investors by requiring brokers to act in their best interests?
During your anti-Dodd Frank testimony, you claimed that the Volcker rule’s restrictions on proprietary trading in commercial banks could harm investors, employers, and the U.S. economy. In reality, Section 619 of Dodd-Frank is riddled with loopholes, and violators face no meaningful penalties.
- Should there be no limits on commercial banks’ ability to trade with their own funds?
Climate-Related Financial Risk
You have criticized the SEC’s climate risk disclosure rule, arguing that it would “tee up shifts of capital from fossil-fuel-based industries, such as oil production and heavy manufacturing, toward industries that are supposedly greener.”
- Do you disagree with the scientific consensus that transitioning from a fossil fuel-based economy to an economy powered by renewable energy is necessary to avoid catastrophic levels of global warming?
- Are you aware that investors overwhelmingly supported a stronger version of the SEC’s proposal to require companies to disclose their exposure to climate risk?
- Investors’ comments to the SEC conveyed that standardizing climate risk disclosures would help the agency fulfill its mission of protecting investors, maintaining fair and efficient markets, and facilitating capital formation. Do you disagree?
Corporate Political Power
You have condemned progressive efforts to shape corporate behavior. In 2012, you accused unions, environmentalists, LGBTQ+ rights groups, and state pension funds of “co-opting and disenfranchising” companies through shareholder activism, and in recent years, you’ve decried the consideration of ESG (Environmental, Social, and Governance) factors in investment decisions.
At the same time, you have praised conservative efforts to dominate U.S. politics. You defended the American Legislative Exchange Council (ALEC) as a “great organization” in 2012, when some corporations were withdrawing funding from ALEC in response to complaints that the right-wing bill factory’s push for so-called “stand your ground” laws had contributed to the vigilante killing of Trayvon Martin.
- Why is it inappropriate for mass membership-based organizations to try to influence the behavior of corporations but laudable for secretive groups backed by billionaires to commandeer the political system?
In 2015, you were the only one of 68 business leaders to refuse to endorse a report on how to combat “crony capitalism” in Washington, whose recommendations included reforming campaign finance laws and imposing stronger restrictions on the revolving door between lobbyists and Congress. In addition, you’ve defended the use of anonymous “dark money” in politics.
- Is allowing corporations and billionaires to hijack the political process with few to no checks on their power consistent with the principles of democracy?
SEC Enforcement
In 2006, you argued that allowing companies to grant stock options to executives before disclosing news that would increase the share price should not be considered insider trading.
- Do you still think that such maneuvers, which could be considered criminal fraud, should be permitted?
You have long opposed large monetary penalties for corporate wrongdoing, arguing that they hurt shareholders while failing to deter fraud.
- Since you’re opposed to hefty corporate penalties, does that mean we can expect you to advocate for prosecuting individual wrongdoers to the full extent of the law?
Conflicts of Interest
You resigned from your position as SEC Commissioner in the summer of 2008, six weeks before Lehman Brothers collapsed. In 2009, you founded Patomak Global Partners, a consulting firm that helps financial corporations dilute regulatory efforts and acts as a court-appointed monitor for businesses that have agreed to improve regulatory compliance.
Patomak-Deutsche Bank
In October 2016, Patomak began monitoring Deutsche Bank’s agreement with the Commodities Futures Trading Commission to oversee and disclose its derivatives trading. At the time, Deutsche Bank was negotiating with the Department of Justice over the size of its fine to settle mortgage-related wrongdoing. Also at that time, Deutsche Bank was Donald Trump’s biggest creditor. Such links raise major conflict of interest issues.
- Did Patomak monitor Deutsche Bank vigorously?
- Did financial regulators, possibly nominated by Trump based on your recommendation as a member of his 2016 transition team, take it easier on Deutsche Bank in exchange for favorable treatment of Trump’s businesses?
Patomak-FTX
In January 2022, Patomak began advising FTX, a cryptocurrency exchange, on its derivatives business. In November 2022, FTX collapsed when a run on deposits revealed that founder Sam Bankman-Fried had stolen $8 billion from customer accounts to fund political donations, charitable giving, and entrepreneurial investments.
- Was Patomak aware that Bankman-Fried was looting his customers’ accounts?
- What was the nature of your relationship with Bankman-Fried?
- FTX having been a client of yours means that you failed to foresee and avoid the occurrence of this major financial upheaval. What does this say about the viability of your deregulatory views? What does it say about your competency as a potential regulator?
You blamed FTX’s implosion on the U.S. government’s failure to “make our rules accommodating to this new technology.”
- Why should regulators, who are tasked with protecting the public interest, make “accommodating” rules for an industry that provides so few positive benefits to society while worsening the climate crisis and facilitating fraudulent and criminal activities?
Token Alliance, Securitize, and the cryptocurrency industry
Since 2017, you’ve served as co-chair of the Digital Chamber of Commerce’s Token Alliance, which lobbies against the robust regulation of blockchain-based financial instruments, and you’re also on the advisory board for Securitize, a digital securities issuance platform.
Supporters of the crypto industry celebrated your nomination, with Bitcoin’s stock price hitting a record high. Former SEC Chair Richard Breeden said that if he were in the cryptocurrency industry, he “would be thrilled” to have you “in charge of regulation.”
- Why do you think the crypto world celebrated your nomination? Why would they be happy to see you running the SEC?
Duke University’s Lee Reiners warned that your appointment as SEC Chair could unleash a “golden era” of “crypto fraud and scams.”
- Does the fact that you’re closely aligned with the crypto industry undermine your ability to fairly oversee it? Do you not consider your closeness to multiple key crypto industry players to be a conflict of interest?
You’ve blamed the SEC for pushing crypto firms offshore and argued that the agency should be “more accommodating” to crypto firms to encourage them to operate in the U.S. You’ve also spoken favorably of SEC Commissioner Hester Peirce’s Token Safe Harbor Act, a proposed rule that would give crypto companies greater legal leeway.
- How would you approach the regulation of digital assets? Are they securities that should be primarily regulated by the SEC, or are they commodities that fall under the CFTC’s jurisdiction?