“Yesterday’s Senate Banking hearing is yet one more example of mainstream media failing the interests of the American people.”

via wallstreetonparade:

It’s becoming clear that the reason so many Americans have their pockets picked by Wall Street scam artists year after year is that mainstream media simply won’t put the dangers of dealing with the mega Wall Street banks on their front pages. Yesterday’s Senate Banking hearing is yet one more example of mainstream media failing the interests of the American people.

At yesterday’s hearing, Senator after Senator probed the Chairman of the Securities and Exchange Commission, Jay Clayton, on what were clearly intentional failings to hold Wall Street accountable. The scathing rebukes of the SEC came from both Republican and Democrats on the Senate panel. But you will find no reports about that hearing on the front pages of newspapers today — or in any section of leading newspapers.

Particularly harsh in their appraisal of Clayton’s rein at the SEC were Republican Senator Tom Cotton of Arkansas, Democratic Senators Sherrod Brown of Ohio and Senator Chris Van Hollen of Maryland.

Brown is the ranking member of the Senate Banking Committee and spoke at length at the opening of the session, right after the Republican Chair of the Committee, Mike Crapo, gave a far more charitable assessment of the SEC under Clayton. Brown listed example after example of how Clayton’s SEC has worked for the interests of “serial law breakers” on Wall Street over the interests of “hardworking families.” Brown’s statement appears in its entirety below.

Senator Tom Cotton provided a scathing rebuke of the SEC’s failure to stop the grossly conflicted and grossly overvalued company, WeWork, from getting its prospectus to become a publicly-traded company through the SEC’s fogged lenses. The initial public offering (IPO) of WeWork didn’t get pulled this year because the SEC refused to greenlight its offering statement to the public investor. It got pulled because its obscene conflicts with its founder and CEO, Adam Neumann, went viral on social media platforms and in the business press. Those conflicts included Neumann buying up real estate and then leasing it back to his own company; trademarking the words “We Company” and then selling it to his company for $5.9 million; and attempting to list his company with a valuation of $47 billion when it was just weeks away from running out of money.

Cotton told Clayton: “I want to talk today about the collapse of WeWork. That company just laid off 2400 workers right at Christmas – 20 percent of its workforce – due almost entirely to the incompetence, greed and possible frauds and crimes of WeWork’s founder, Adam Neumann.”

Cotton asked Clayton if the SEC was investigating WeWork. Clayton said he couldn’t comment as to what investigations the SEC had open.

Cotton raised the issue that the SEC had WeWork’s prospectus for nine months before the company filed for a public offering. Many of the outrageous conflicts were enumerated in that prospectus but that didn’t stop the SEC from allowing WeWork to move along with its plans to offer its shares to working families and other public investors.

Cotton brought up a Wall Street Journal report that Neumann had smoked marijuana while on a flight to Israel while he was CEO of WeWork. Cotton said he hoped that Neumann’s “transporting illegal drugs across international boundaries” was being investigated by the U.S. Justice Department.

Cotton stated to Clayton that despite all of the outrageous conflicts of Adam Neumann, he was paid $1.7 billion “to walk away from the smoking rubble of his company.” Cotton said Neumann was able to “extract that payout because the corporate governance structure gave him 10 votes per share, a kind of super voting stock that enabled him to hold his company hostage until the other investors paid him just to go away and stop destroying its value. And he’s even on a four-year consulting contract at $185 million…” Cotton added.

Cotton said the WeWork scandal was “aided and abetted by some of Wall Street’s biggest banks and biggest law firms.”

The lead underwriters of what was to be the second biggest IPO of the year were JPMorgan Chase and Goldman Sachs. WeWork was represented by one of the most sophisticated corporate law firms in America, Skadden Arps, Slate, Meagher & Flom. The Wall Street bank underwriters were represented by another sophisticated law firm, Simpson, Thacher & Bartlett.

The imagery of the WeWork disaster isn’t helped by the fact that before landing as Chairman of the SEC, Clayton was a law partner at Sullivan & Cromwell, another major Wall Street-linked law firm. As Wall Street On Parade previously reported, prior to his SEC post, Clayton had represented 8 of the 10 largest Wall Street banks in the prior three years.

Senator Van Hollen told Clayton that he was disappointed that Clayton is focused on “strengthening the hand of already strong CEOs and corporations at the expense of their shareholders in many cases, with the proxy advisory regulation you’ve proposed.”

Van Hollen stated that Clayton had attempted to present the need for the proxy advisory rule as rising out a concern on the part of main street investors. Van Hollen exposed the fact that the letters from average Americans that had been cited by Clayton as the basis for the need for this rule change were actually orchestrated by a “dark money front group that corporations use for messaging” called “Sixty Plus.” Its donors include Chevron and Exxon, said Van Hollen. Clayton said he was unaware of the group or its involvement.

Van Hollen appeared to stun Clayton by telling him that letters cited by Clayton from a retired couple and military veterans were actually from relatives of the leaders of Sixty Plus. Van Hollen scolded Clayton for “becoming the vehicle” for deceptive practices and misleading statements.

The proposed proxy advisory rule would force proxy advisory firms to submit their research first to the corporations before giving it to their clients, like public pensions. This would potentially allow corporations to intimidate the proxy advisory firms to back off on their recommendations or be otherwise compromised.

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U.S. Sen. Sherrod Brown (D-OH) – ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs – delivered the following opening statement at the hearing ‘Oversight of the U.S. Securities and Exchange Commission’ on December 10, 2019:

Thank you Chairman Crapo, and welcome Chair Clayton.

Over the past few years, in this Committee, we have seen the Trump Administration dismantle many of the protections we put in place after the last financial crisis, putting our financial system and hardworking families around the country at risk.

The SEC has flown under the radar, but often the agenda has been the same – taking Wall Street’s side over and over, instead of standing with investors saving for retirement or college or a down payment.

Taken together, the SEC’s latest actions are making it harder to hold corporate executives accountable to investors and hardworking Americans.

While I appreciate the Enforcement Division’s initiatives, including those to protect teachers and military service members from fraud and misconduct in financial advice, you’ve done so much damage by adopting what you call “Regulation Best Interest”. Under that rule, brokerage firms can merely disclose, but don’t have to eliminate, firm-level conflicts.

It should be simple – investment firms need to work for the people they serve. Americans need to have confidence the professionals that they’re trusting with their hard earned money are working for them, not scamming them to line the firm’s own pockets. You could have simply followed Congress’s guidance in the Dodd-Frank Act to create a uniform fiduciary standard for brokers and advisors, which would be the best way to give investors confidence that their interests come first. But you didn’t.

And that’s not the only part of Dodd-Frank you are working to undermine. Look at the SEC’s proposal to amend the whistleblower program, which is one of the most successful programs created under Dodd-Frank. We need brave workers to stand up to corruption and abuse when they see financial companies scamming people or engaging in other illegal behavior.

The only way individual workers are ever going to able to stand up to powerful Wall Street firms is if we give them protection.

We’ve already seen a chilling effect from your proposal.

Each year since inception of the program, the number of tips has increased, in some years by more than 10 percent. But after your rule proposal in 2018 introduced a cap on whistleblower awards, the number of tips declined for the first time in 2019.

The proposed cap on awards raised so many alarm bells that you had to put out a statement to clarify. I know ‘whistleblower’ is a dirty word nowadays to some in this town. It always is to serial lawbreakers.

I don’t see how you can make significant changes to a successful program like this without understanding that the decline in tips is a result of your actions, and the environment this Administration has created, attacking rather than protecting those who speak out against abuse of power.

As the SEC continues to take fewer actions that hold the largest financial institutions accountable, we must encourage whistleblowers to identify misconduct wherever it exists and help uncover complex frauds.

The SEC’s recent proposed rules on proxy advisors and shareholder proposals are also clear examples of the Administration taking the side of corporate interests over Americans saving and investing for their future.

Both proposals make it more difficult for shareholders to hold corporate executives accountable.

The proposal on proxy advisors could make it harder for institutional investors to have timely access to independent research and analysis from the proxy advisory firms that they hire. The proposed rule would give corporations access to investors’ research before the public retirement systems, investment fund managers, and foundations who manage hardworking Americans’ money.

The SEC says the changes are necessary because of errors and inaccuracies, but it provided scant evidence of errors. Instead, the new rule would give companies a new tool to intimidate proxy advisers and threaten their independence.

The overhaul of the shareholder proposal rule would make it easier for corporate management to silence shareholders and avoid dealing with important issues critical to investors.

The amendments could stop proposals for votes on issues such as disclosure of corporate political spending, separating the roles of Board Chair and CEO, and non-discrimination policies.

I am disappointed in the direction you’ve taken these rules that have for decades allowed investors to hold management accountable, all while executives are further entrenching themselves and ignoring workers and shareholders.

Protecting workers’ hard-earned savings should begin with a simple concept: putting their rights first.

Mr. Chair, I hope that the SEC will remember that.

But over the last week we have had nearly all the financial regulators before the Committee—the Fed, the FDIC, the NCUA, and today the SEC – all defending the same policies that amount to a wish list for Wall Street and corporate interests. The President promised to look out for ordinary, hardworking people, but he and the people he has put in charge of these agencies betray those workers over and over and over.

Mr. Chairman, I’d like to offer for the record this letter from the Ohio Public Employees Retirement System, raising concerns about the SEC’s rulemaking on proxy advisory firms.