Will Jay Clayton be the new Thomas Becket?

Joaquín Garralda. Profesor. IE Business School

27 February 2017

The appointment of Clayton as president of the SEC brings to mind Thomas Becket as Archbishop of Canterbury in the times of Henry II. Is history about to repeat itself?

President Trump’s appointment of Jay Clayton as the new president of the SEC (Securities and Exchange Commission, the agency that regulates and controls activities of listed companies) has added fuel to the fire of criticisms of Trump’s selection of people to form part of his team.  Clayton is a famous lawyer who has represented many of Wall Street’s financial firms, such as Goldman Sachs y Barclays, during their purchases of companies and conflicts with the agency. His trajectory has produced strong criticisms that this risks “putting the fox in the henhouse.”  

Could the twelfth century story of Becket and Henry VIII be about to repeat itself?

The King appointed Thomas Becket as Archbishop of Canterbury. Becket was his hunting partner and already held the position of Chancellor, also bestowed on him by the King, the idea being that such a choice would facilitate relations with the Church. The king hoped it would help him win back some of the privileges and powers that his grandfather Henry I had enjoyed, and that the church had subsequently curtailed. But that is not how things turned out. Becket  became an ascetic, and a staunch defender of the interests of the church that he handled very cleverly, using the interests of nobles and kings of other countries and ruling clergy to prevent the king’s attempts to broaden his power.

Following the financial crisis of 2008, many US control and risk regulations were tightened aimed at avoiding a repetition of the crisis. The Dodd-Frank law, signed by Obama in order to be processed in 2010, contains over 2,300 pages, covering many aspects of corporate governance, and financial regulations that were not well received by listed companies and major banks. Disgruntled banks cited the administrative cost of the information requirements and the limitation of financial operations due to the level of liquidity required for certain operation.   This rejection made some organizations to go to court to have the processes of certain regulations reviewed. In the message he sent when announcing Clayton’s appointment,  Trump said: “We have to take away some regulations that have are stifling investment in US firms,” which makes it sound like his work will consist of undoing regulations currently in force, or in the process of being passed.

Just as Becket’s appointment worried the church, Clayton’s appointment has caused the European regulator concern. He has adopted a position of waiting prudently to see how things develop, to consider some aspects of the regulatory framework he will set up. This appears to be the logical thing to do, given that the finance sector’s influence is clearly global. Its financial system is one of the competitive advantages of the US, with highly competitive banks and a very sophisticated finance market.

Although Becket did manage to stymie many of the king’s attempts, the fact that he was assassinated by knights loyal to the king can hardly serve to inspire Clayton much. Nevertheless, the fact that he is very capable, given his experience in related issues, his intelligence and long-term vision means that he will probably do his job as well as he is able, and that a reasonable review of regulations designed in the throes of a crisis, may actually improve the situation. And if that is the case, contrary to the how the old saying goes, we may not be able to judge this particular book by his cover. 


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