SENATE BANKING COMMITTEE SEC CHAIRMAN CONFIRMATION HEARING
Overview
For questions on the note below, please contact the Delta Strategy Group team.
On March 27, Paul Atkins, President Trump’s nominee for Securities and Exchange Commission (SEC) Chairman, appeared before the Senate Committee on Banking, Housing, and Urban Affairs for his confirmation hearing. Atkins’ testimony is available here, and additional nominees before the Committee were:
- Jonathan Gould, Nominee for Comptroller of the Currency, Department of the Treasury
- Luke Pettit, Nominee for Assistant Secretary of the Treasury, Department of the Treasury
- Marcus Molinaro, Nominee for Federal Transit Administrator, Department of Transportation
On April 3, the Committee held an Executive Session to vote on the nominees under Committee consideration. Atkins’ SEC Chairman nomination is for two consecutive terms, with a 13-11, party-line Committee vote to report his nomination favorably to the full Senate. Gould, nominated for Comptroller of the Currency, was reported favorably to the Senate with a Committee vote of 13-11. Pettit, nominated for Assistant Treasury Secretary was reported favorably with a 19-5 Committee vote, with Senators Reed (D-RI), Warner (D-VA), Warnock (D-GA), Kim (D-NJ), Gallego (D-AZ), and Alsobrooks (MD) voting in favor of his confirmation. Molinaro, nominated for Federal Transit Administrator, was reported favorably with a 20-4 vote and Senators Reed (D-RI), Warner (D-VA), Warnock (D-GA), Cortez Masto (D-NV), Kim (D-NJ), Gallego (D-AZ), and Alsobrooks (MD) voting in favor.
Attached is a summary of the hearing prepared by Delta Strategy Group that includes several high-level takeaways, followed by summaries of opening statements.
Key Takeaways
The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.
- Chairman Scott (R-SC) criticized the SEC under its previous leadership, citing rulemakings being overturned as he questioned Atkins on how to address ongoing partisan issues and restore the SEC’s effectiveness. Chairman Scott called for the SEC to ensure fair treatment for crypto companies, with Atkins affirming his commitment to unbiased regulation.
- Senator Britt (R-AL) raised concerns about the SEC’s Consolidated Audit Trail (CAT) system, citing security and privacy risks as she urged Atkins to reassess both the necessity of CAT and its data protection measures.
- Senator Tillis (R-NC) questioned Gould on crypto access to banking, with Gould voicing his support for rescinding Interpretive Letter 1179 within efforts to foster innovation within a regulated framework. He also questioned Gould and Pettit on the failure of SVB, with both nominees discussing how it was attributed to managerial and supervisory failures rather than regulatory lapses, emphasizing the need for improved risk management practices.
- Chairman Scott and Senator Tillis questioned Gould on whether he supported the removal of “reputational risk” from banking guidance, with Gould emphasizing that reputational risk is often used as a pretext for political discrimination and confirming his support for its removal from supervisory guidance. Gould committed to ensuring no future OCC guidance would include reputational risk as he highlighted the need for precise, objective risk assessments.
- There were bipartisan discussions on the need to ensure that foreign companies, including Chinese companies, listed on U.S. exchanges comply with American accounting standards. Senators Kennedy (R-LA) and Van Hollen (D-MD) discussed their co-sponsorship of the Holding Foreign Companies Accountable Act, emphasizing the need for stronger enforcement and transparency.
- Senators Kennedy and Cortez Masto (D-NV) questioned the short-term impact of tariffs on consumer prices and whether they are a form of tax on consumers. Pettit responded that while tariffs might increase costs on imported goods in the short term, their long-term objective is to incentivize domestic manufacturing.
- Ranking Member Warren (D-MA) raised concerns that Atkins’ judgment as Chairman could be compromised due to financial conflicts and a lack of transparency, questioning his divestment from Potomac Global Partners and whether his assessments would be purely objective or influenced by external interests. She also criticized Atkins’ approach as an SEC Commissioner before the 2008 financial crisis, with Atkins stating that it was not overregulation but “misregulation” and misplaced focus that contributed to the crisis.
Opening Statements and Testimony
Chairman Tim Scott (R-SC)
The Biden Administration stifled innovation and economic growth through its heavy-handed, ideological approach to regulation. Nowhere was this clearer than at the SEC under Chair Gary Gensler. Paul Atkins is a former SEC Commissioner who has dedicated his career to ensuring that our capital markets remain the envy of the world, with the experience necessary to return the SEC to its core mission. He will roll back the Biden Administration’s disastrous policies, promote capital formation and retail investment opportunities, and provide long-overdue clarity for digital assets, ensuring that American innovation does not fall further behind. Under President Biden, regulators weaponized their authority to “debank” politically disfavored industries and individuals, most recently crypto firms as a part of Chokepoint 2.0. We must end debanking and return the OCC to its true purpose: chartering and supervising banks to ensure they serve all credit-worthy customers, not just those who fit a particular mold. The Acting OCC Comptroller of the OCC has done a great job and formed a foundation with strong, common-sense, pro-growth reforms that we need to return to. He removed references to reputational risk, consistent with my FIRM Act, from the OCC bank examination guidance and instructed examiners to no longer factor in reputational risk.
Ranking Member Elizabeth Warren (D-MA)
President Trump is conducting a dangerous purge of the federal government. I have very serious concerns about the nominee’s willingness to aid and abet illegal ransacking of our government. I have concerns about the Trump Administration’s next round of big bank deregulation and bailouts, while DOGE tightens its grip on Treasury. Capital markets remain an engine for economic growth and innovation, but they require vigilance to stamp out fraud and self-dealing. We must ensure that giant corporations do not scam average investors out of their retirement savings. Atkins got pretty much everything wrong in the run up to the 2008 financial crisis.
Paul Atkins, Nominee for SEC Chairman
I have always advocated for greater transparency at the SEC and emphasized robust cost-benefit analysis when considering new regulations. Regulation can stoke innovation, facilitate investment goals, and create opportunities, or burdens, on businesses’ ability to compete. Clear rules of the road benefit all market participants. Unfortunately, lawyers do not speak the same language as businesspeople, or compliance professionals, or IT staff. It takes knowledge and experience to translate and anticipate issues that inevitably arise among these various professionals tasked with implementing regulations. Our goal at the SEC should be to facilitate those efforts, analyze their effectiveness, and use our enforcement power to cure and rectify wayward actions. We need to prioritize providing a firm regulatory foundation for digital assets through a rational, coherent, and principled approach during this pivotal moment for our economy. People are eager to invest in the U.S. now that President Trump is at the helm. Unclear, overly politicized, complicated, and burdensome regulations are stifling capital formation, while American investors are flooded with disclosures that do the opposite of helping them understand the true risks of an investment. We need to ensure that the U.S. is the best and most secure place in the world to do business and invest. It is time for the SEC to return to its core mission of investor protection; fair, orderly, and efficient markets; and capital formation.
Jonathan Gould, Nominee for Comptroller of the Currency
If banks are to serve their role supporting the U.S. economy, they must be allowed to engage in prudent risk-taking. But in the years since 2008, bank regulators have at times tried to eliminate rather than manage risk, frustrating the ability of banks to fulfill their function. This blinkered approach to risk management has implications for the cost and availability of credit, the system’s ability to absorb shocks, and its adoption of new technologies and embrace of innovation. I led the OCC’s efforts to implement one of this Committee’s most significant pieces of recent banking legislation: the Economic Growth Act of 2018 and the regulatory tailoring it required. We must ensure the continued relevance of our national banking system and its ability to support our national economy consistent with the President’s vision and commitment to broad and sustained economic growth.
Luke Pettit, Nominee for Assistant Secretary of the Treasury
While our financial system may drive investment and economic growth, it supports the lives of all Americans, and their means for pursuing the American Dream. This is an important responsibility of promoting the strength of the financial sector, guiding Treasury’s efforts in critical areas such as financial education, community development, and cybersecurity. It requires balancing the diverse interests of financial institutions both small and large, but, above all, ensuring that the interests of the American people are put first. I will work alongside the members of this Committee to uphold the safety and soundness of our financial institutions and support a financial sector that fosters economic growth, freedom, and opportunity for all Americans.
Marcus Molinaro, Nominee for Federal Transit Administrator
To meet today’s challenges and tomorrow’s demands, transit must embrace technology, modernize systems, and leverage investment in housing, commercial, and overall economic development. To fully realize this vision, we must drive innovation, streamline permitting, boost performance, and fully harness technology to transform how we plan, build, and operate transit. I value the work of the unions and see them as partners in building a system that is safer, more efficient, and future-ready.
Discussion
Chairman Scott (R-SC): How can the SEC recover from the series of damaging losses, including multiple rulemakings overturned in court, staff attorneys sanctioned for gross abuse of power in the debt box case, and the highest attrition rate in over a decade, as it returns to its core capabilities as an agency? Atkins: I agree that the issues you raised are very disturbing. I will work to increase agency morale, address dysfunction and demoralization, and get back to basics of the SEC’s mission.
Chairman Scott (R-SC): Do you support the Acting Comptroller’s decision to remove references to reputational risk? Are you supportive of rescinding Interpretive Letter 1179 as a crucial step in rolling back OCC guidance that limited crypto companies’ access to the U.S. banking system? What role do you envision the OCC playing in allowing digital asset innovation? Gould: I do, but there is more needed to end debanking, and more generally, the politicization of federal banking agencies. It is unacceptable for banks or regulators to discriminate against customers on the basis of the customer’s politics or the mere fact that they are engaged in a lawful activity that may be politically disfavored. Many of these activities are clearly legally permissible. I will engage in the hard work of determining constructive and lawful ways to conduct these activities within the system in a safe and sound fashion. Over the past four years, the OCC has gained experience with these assets and will be prepared to ensure supervision in a safe and sound manner moving forward.
Senator Kennedy (R-LA): Are you concerned about reports that Sam Bankman-Freud’s family benefited financially from his fraud? Atkins: I will work with the SEC to ensure there are not two standards applied.
Senator Kennedy (R-LA): Why are there different rules for foreign companies’ registering with the SEC, and why does it show the need for the Holding Foreign Companies Accountable Act? Atkins: That is unclear to me.
Senator Kennedy (R-LA): What are the short-term effects of tariffs? Pettit: It is hard to assess the long-term impacts.
Senator Cortez Masto (D-NV): What are the short-term effects of tariffs, and does it mean higher costs for American consumers? Would you agree that tariffs are a tax on consumers? Pettit: The impact of tariffs in the short run may increase the prices of the imported goods, but the objective of these tariffs in the long run is to help incentivize more manufacturing in the U.S. The effect of tariffs is very different than a tax on Americans, but it could lead to higher prices on certain imported goods.
Senator Cortez Masto (D-NV): Will you respect the independence of the bank regulators? What does coordination via Treasury, rather than consolidation of agencies, mean in ensuring that our regulators work in parallel with each other and the industry? Pettit: I will, and look forward to working with the regulators who do operate independently. We need to avoid the outcome of regulators telling institutions different things, so institutions supervised by multiple federal regulators are not torn between conflicting guidance. The objective here is to ensure there is no uncertainty about which rules to follow across different agencies.
Senator Moreno (R-OH): Does it make sense to spend two to three times more money on electric buses compared to those powered by renewable or compressed natural gas? Molinaro: Local and regional transit systems need to make purchasing decisions that make sense for them. While I embrace an all-of-the-above energy approach, renewable energy sources are a great way to address the intersection of the agricultural rural economy and mass transit. Currently, the law requires a certain distribution of dollars for low and no-emission vehicles, which Congress will debate and consider through reauthorization. Our job is to encourage local and regional transit systems to make purchasing decisions that align with their needs.
Senator Britt (R-AL): Will you commit to reevaluating the necessity of CAT and ensuring that adequate protections are in place to safeguard the data already collected, given the significant security and privacy risks it poses? Atkins: Absolutely.
Senator Warnock (D-GA): Did you state that overregulation contributed to the 2008 financial crisis? Atkins: I do not recall saying overregulation. I think it was misregulation and being distracted by ancillary issues instead of marketplace issues. The distortions that were created through the regulatory scheme at the time were a distraction for examiners. I do not know if we were too hard on banks.
Senator Kim (D-NJ): Do you agree that the prospects of foreign companies manipulating our market present a national security threat? Should we continue CAT? Atkins: Yes. I will look into the status of the CAT as I consider the impacts on regulators and market participants. It needs to be reviewed also by other agencies, such as FINRA, and that is what I intend to do.
Senator Banks (R-IN): How can we encourage more capital investment to help American companies compete against China’s manufacturing economy? Atkins: There is a lot of capital available, but it is not flowing into the public markets due to regulatory and other roadblocks. If we can streamline these processes and encourage people to utilize the public markets, it will be for the better.
Senator Banks (R-IN): Do you think environmental and social governance (ESG) investment makes America’s economy stronger, and why or why not? Atkins: I want to get politics out of the financial markets and out of how the SEC interacts with them. Unfortunately, some are using other people’s money to influence corporations through distortions of the corporate governance process, and that will end. We will put protections in place to ensure that money managers and others remain focused on actual investment strategy rather than national politics.