Say What?

SEC Nominee's Distorted Reality

Trump's pick to be Wall Street's top cop has a warped view of his beat.

The leading candidate to become Wall Street’s next top cop has a strange view of U.S. markets.

Jay Clayton, a prominent banking lawyer, has been nominated by President Donald Trump to head the Securities and Exchange Commission. Apparently, he seems to think that the U.S. capital markets are a sad, shriveling spot in the global economy, one that locks out individuals.

"It is clear that our public capital markets are less attractive to business than in the past," he said in remarks prepared for his Thursday testimony in front of the Senate Banking Committee. "As a result, investment opportunities for Main Street investors are more limited."

He appears to peg this pessimistic view to a decline in the number of publicly traded companies and in particular a drop in IPOs, especially U.S.-listed IPOs by non-U.S. companies. But that's an extremely narrow perspective. The need to go public isn't as great as it has been in the past, in large part because of how robust private markets and debt financings have become. It's not a reflection of a significant deterioration in the competitiveness of the U.S. market as a whole relative to the rest of the world. In fact, by almost every measure, U.S. capital markets are doing remarkably well. 

Lots of Options

Consumers have a record number of U.S. mutual funds to choose from


Individual investors can choose from a record number of mutual and exchange-traded funds when deciding where and how to invest. They're being charged record low fees. The retail funds have, in many cases, outperformed hedge funds aimed at larger, more sophisticated institutions.

Open for Business

ETFs have surged in recent years as investors embrace passive investing

Source:; Investment Company Institute

On the banking side, U.S. companies are selling record amounts of debt this year at extraordinarily low costs. In fact, U.S. capital markets are so attractive that many European corporations are trekking across the Atlantic to raise money in America, as my Gadfly colleague Marcus Ashworth noted Thursday.

Rushing to Sell

U.S. investment-grade companies have been selling debt at a record pace this year

Source: Bloomberg

Even on a relative basis, U.S. banks are grabbing market share away from European financial companies at a steady clip and appear to be in substantially improved form, both competitively and from a stability perspective.

Winning the Race

U.S. banks have gained share in debt trading, one of the most lucrative businesses

Source: Bloomberg, Company filings

Figures are for the first nine months of 2016

Meanwhile, as Clayton should know as a longtime mergers and acquisitions lawyer, companies have been merging and acquiring one another at an unprecedented pace. Bond buyers have been largely happy to finance these transactions (or even just to give big companies some extra cash to pay fatter dividends.)

Deals Galore

Companies have merged and acquired each other at a record clip in recent years

Source: Bloomberg

It's hard to imagine what Clayton is talking about when he says that American public markets are "less attractive to business than in the past" or how his role at the SEC could change that.

Perhaps he is suggesting that the U.S. economy would be better off if Wall Street traders could take as much risk as they wanted and investment firms had easier access to lines of leverage. But even many Wall Street bankers would disagree with that assessment.

Clayton's grim portrait of U.S. markets doesn't jibe with the evidence. He needs to do a better job explaining his view before he's given the privilege of leading the SEC.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Lisa Abramowicz in New York at

    To contact the editor responsible for this story:
    Daniel Niemi at

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