Warren Grills SEC Nominee on Failed Judgement Before 2008 Crisis: “Simple question, Mr. Atkins. Were you wrong?”
Warren pressed Atkins on failure to commit to disclose buyer of his consulting firm: “you know, some people might call that a pre-bribe”
Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, grilled Securities and Exchange Commission (SEC) Chair-Designate Paul Atkins during his nomination hearing on his track record of failed regulatory judgement, including in the lead-up to the 2008 financial crisis, and his clear conflicts of interest.
Ranking Member Warren’s exchange with Paul Atkins below:
Warren: Thank you, Mr. Chairman. So Mr. Atkins, you served as an SEC Commissioner from 2002 to 2008, the lead-up to the 2008 financial crash, that crashed the markets, cost 10 million families their homes, and cost millions more their jobs. Your job was to spot and head off risks that were building up in financial markets, but you showed staggeringly bad judgement. I just have a few examples since we’re limited on time.
In 2004, when Lehman Brothers and Bear Stearns asked the SEC to allow them to reduce their capital buffer by 40%, you said yes and voted to weaken the rules on investment banks.
In August 2007, after what was then “the worst week for the American stock market in nearly five years,” you bragged that “principles of regulatory restraint have been affirmed as the market has continued to demonstrate a capacity to minimize and absorb systemic risk.” Worst week, and you said “great, it shows how strong we are.”
And then days after Bear Stearns’ collapse in March of 2008, you made fun of people who thought we needed stronger financial regulations, claiming they were “wallowing in a period of irrational pessimism” and you said that “regulators must not stand in the way of investors and market participants sorting this situation out.” Yeah, it sorted itself out with the biggest crash since the Great Depression.
So simple question, Mr. Atkins. Were you wrong?
Atkins: Well Senator Warren, you know there are as we saw on the Congressional Oversight panel for TARP, there were many causes for the problems there with the subprime mortgage crisis.
Warren: But I’m asking about if you were wrong about deregulation.
Atkins: No I don’t believe so.
Warren: You know that both the SEC Inspector General and the bipartisan financial crisis inquiry commission said that the SEC’s deregulation of investment banks contributed to the crisis. If you haven’t done it yet, I recommend that you read this, Mr. Atkins.
Look, this job is about judgement. And holding up on your resume that you were one of the people on the job to exercise judgement in the runup to the biggest crash since the Great Depression and now your hindsight is not 20-20, it’s 20-0. You still say that weakening those regulations didn’t have anything to do with that crash. I really hope you will read the bipartisan analysis that says otherwise because it’s very dangerous to have you in charge of the SEC.
Now one of my other top concerns about your nomination, Mr. Atkins, is that your judgment will be influenced by more than an objective assessment of the data in front of you. After your stint as an SEC Commissioner, you founded a consulting firm called Patomak Global Partners. Patomak counts every kind of financial firm subject to the SEC’s rules among its clients: banks, asset managers, brokers, exchanges, fintechs, and crypto companies.
Your clients pay you north of $1,200 an hour, for advice on how to influence regulators like the SEC. And if you’re confirmed, you will be in a prime spot to deliver for all those clients who’ve been paying you millions of dollars for years.
So Mr. Atkins, given how breathtaking your financial conflicts of interests are, I sent you a letter requesting that you commit to a higher standard of government ethics, slow down the revolving door here. Several major financial regulators in the previous Administration agreed to these higher standards. But you sent me a response 10 minutes before this hearing started saying no, you think you’ve done enough. That is deeply concerning to me.
But let’s focus on getting just one thing straight. Your consulting company is estimated to be worth about $50 million. Will you at least disclose, you’ve said that you will sell it if you are confirmed, will you disclose who the buyers are and how much they will pay so we can make certain that these are not people who are just buying access to the future chair of the SEC?
Atkins: Well Senator Warren, I have abided by the Office of Government Ethics process.
Warren: I have a question about selling Patomak Partners, it’s an easy yes or no.
Atkins: I will abide by the process.
Warren: So is that a no? You’re not going to tell us who you’re going to sell it to and how much money you get? To people who will have business in front of the SEC. You know, some people might call that a pre-bribe.
Thank you, Mr. Chairman.
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