Jay Clayton, the Wall Street lawyer tapped to lead the SEC, faces what could be an uncomfortable reunion this week with Senator Elizabeth Warren.
Two decades ago, Warren was a little-known law professor at the University of Pennsylvania. Clayton was a Penn law student at the same time. She went on to become the finance industry's most relentless critic, while he made millions as a lawyer representing big banks and hedge funds. Their paths will cross again Thursday at Clayton's Senate confirmation hearing, where Warren will be among the most outspoken lawmakers questioning his work on behalf of the industry.
Old school ties aren't likely to smooth over their differences. Clayton, 50, never had Warren as a teacher and neither acknowledges having any meaningful interactions on campus.
"I think it will be somewhat contentious," said Roel Campos, a former SEC commissioner. "I don't think it'll make any difference that they have any kind of a common pedigree."
President Trump tapped Clayton to lead the SEC in January, saying the Sullivan & Cromwell partner would ensure that financial companies thrive and create jobs, while still playing by the rules. Warren, 67, had a different take, arguing in a statement after Trump's announcement that the nomination was "great news" if you work at a bank. She added that there's nothing in Clayton's record indicating he will protect investors from Wall Street abuses.
The Massachusetts Democrat isn't waiting for Clayton's confirmation hearing to ramp up her opposition. On Wednesday, a coalition of anti-Wall Street groups plan to hold a "National Day of Action Against Jay Clayton's Nomination to SEC Chair." Warren is scheduled to speak at the Capitol Hill rally, along with Senators Bernie Sanders and Jeff Merkley, the groups, which include Public Citizen, said in a statement.
A representative for Clayton declined to comment before Thursday's hearing, saying the nominee dealt with concerns about his legal work and potential conflicts of interest in forms he filed with the U.S. Office of Government Ethics and the Senate Banking Committee.
Warren declined to comment through a spokeswoman.
Clayton's long list of financial clients includes Goldman Sachs, Bill Ackman's Pershing Square Capital Management and hedge fund titan Paul Tudor Jones, according to his government disclosure form. Clayton's wife is a wealth manager at Goldman, though she plans to step down should he win Senate confirmation.
Public Citizen sent a letter to members of the Senate banking panel this week, urging them to press Clayton on conflicts he might face at the SEC. Democrats, including Ohio Senator Sherrod Brown, the party's ranking member on the banking panel, will probably ask what types of policy decisions and cases Clayton plans to recuse himself from to avoid weighing in on matters involving former clients during his first year at the SEC.
Clayton will likely receive a warmer reception from the banking panel's Republicans. In January, Idaho Senator Mike Crapo, the committee's chairman, called Clayton an "impressive nominee" in a tweet after meeting with him. He said Clayton discussed the SEC's role in making it easier for companies to raise money.
Regardless of any political opposition, Clayton will probably be cleared by the Senate as Republicans have enough votes to approve him. Still, his responses Thursday should shed light on his likely SEC agenda. Wall Street expects him to play a key role in providing regulatory relief for financial firms, particularly with Congress making little headway thus far on Trump's goal of dismantling the 2010 Dodd-Frank Act.
If confirmed, Clayton will join an SEC that could be hamstrung by vacancies. The five-member agency currently has just two commissioners, Republican Michael Piwowar and Democrat Kara Stein. If Stein wants to block efforts to roll back regulations, all she has to do is skip meetings where commissioners vote on rules, leaving Clayton and Piwowar short of a quorum.
Another issue: Stein and Piwowar might deadlock on enforcement cases that Clayton has to recuse himself from. Trump could probably remedy the situation by nominating candidates to fill the SEC's two remaining vacancies.
Warren, who was elected to the Senate in 2012, has a history of clashing with SEC leadership. She often criticized former Chair Mary Jo White, whose legal career and that of her husband's forced her to stay away from several SEC cases. The tension hit its climax in October when Warren urged Barack Obama to demote White, arguing that her SEC tenure had been a failure because she hadn't pursued rules that would force companies to disclose their political contributions.
While Clayton didn't take Warren's classes at Penn, a friend of his who did said the two have at least one thing in common. Like Warren, Clayton enjoys teaching, and he regularly leads a once-a-week course at his alma mater every spring, said Mark Greene, who's now a partner at Cravath, Swaine & Moore in New York.