SEC commissioner Caroline Crenshaw could find out as soon as this week whether she’s likely to be confirmed for a second consecutive term as SEC commissioner by a big margin or a small one.
Crenshaw, who was nominated for a second five-year term as SEC commissioner, faced tough questions during a confirmation hearing last week from Republicans concerned about the SEC’s effort to “regulate climate” and the limits of SEC authority.
Crenshaw’s first nomination by then-president Donald Trump was approved by a unanimous voice vote in the Senate Aug. 6, 2020, and will likely pass muster this year as well, though she is unlikely to do so with nearly as much support as she had at the start of her first term, which expired June 5.
On June 13 Biden administration re-nominated Crenshaw for another term that could keep Crenshaw on the commission until June 5, 2029.
First, she has to pass muster with members of the Senate Committee on Banking, Housing and Urban Affairs – which evaluates important financial-agency nominees before passing their recommendation up to the full Senate for a vote.
Crenshaw took some shots during the hearing, but most of the tough questions during the July 11 hearing than they did on Christy Goldsmith Romero, a Commodity Futures Trading Commission (CFTC) commissioner nominated to take over leadership of the board of the FDIC from Martin Gruenberg, who is under pressure to resign following widespread accusations of harassment and toxic behavior at the agency.
Grilled for Gensler’s agenda
In his opening remarks ranking Republican member Tim Scott raised doubts about Romero’s ability to help the FDIC recover its credibility with consumers or the banking industry, but also attacked Crenshaw for what he called her “radical views of the SEC’s authority.”
Most of Scott’s objections, and most of the tough questions from other members, revolved around the climate-risk disclosure rule the SEC proposed in 2022, adopted March 6, 2024, and put on hold by the SEC in April following negative rulings in federal court.
The fight over climate-risk disclosure became the identifying characteristic of Gensler’s leadership of the SEC, and mobilized opposition funded heavily by energy and manufacturing companies that filed lawsuits to overturn it, and helped unify opposition among activist groups and among members of the House and Senate concerned that the power of the SEC and other federal agencies had expanded far beyond the bounds of their authority granted to them by Congress.
The SEC, which describes the climate rule as an effort to standardize the information public companies already provide to investors about potential changes to their business due to change in the climate, touched off widespread opposition that included campaigns against “anti-woke” investing, and inspired a series of lawsuits that resulted in federal-court rulings that limit the scope of the SEC’s ability to prosecute violations in securities law, and weakened the credibility of expert testimony from the SEC and other independent agencies to which federal courts had previously been forced to respect.
Those who oppose the changes warn that the reversals could seriously undercut the ability of federal agencies to enforce mundane regulations as well as those that break new ground in rulemaking, as the SEC did with the climate-disclosure, cybersecurity, swing pricing and other rule proposals, many of which it has withdrawn for further consideration.
Loss of credibility at SEC
Little of that devolution of authority was evident in the questions Republican members of the committee aimed at Crenshaw, however.
“This climate risk disclosure rule you’re so proud of – how much is that going to cost companies that you regulate?” John Kennedy, R-La. asked Crenshaw, who could not provide a single cost estimate that covered all the companies that might be affected.
“Well, how much is that going to lower world temperatures,” Kennedy asked during an exchange that became more contentious after Crenshaw tried to explain the rule was intended to improve the quality of information available to subscribers and that direct changes in climate “are not what the rule was designed for.”
“That’s not what it’s designed for?” Kennedy asked. “Well, what is it designed for? To virtue signal? To harass the companies you regulate?”
Crenshaw said the goal was to help investors more accurately allocate their capital based on an understanding of climate risk to the companies they invest in.
North Carolina Republican Thom Tillis used a deal-making approach to questions that is common during nomination hearings for federal judges, not agency officials, by asking if Crenshaw would commit during the hearing to “revisiting and limiting Scope 3 requirements.
Scope 3 is the most expensive and controversial level of reporting requirement included in the original version of the climate-risk rule, which requires that public companies disclose their level of greenhouse gas emissions, the carbon credits they purchase and the greenhouse gas emissions of their subsidiaries and direct partners under Scope 1 and Scope 2 requirements. It also requires that the largest companies disclose under Scope 3 the emissions of companies that are part of their supply chains as well as their own.
Crenshaw did not commit to a position on Scope 3, but did say she favored the addition of safe-harbor considerations to limit liability and the use of models and other forms of analysis that would reduce the cost and volume of data companies would have to provide themselves.
Democrat and committee chair Sherrod Brown praised Crenshaw as a “a fierce advocate for protecting Americans’ money” during her four years as a commissioner and during her long career as an SEC staff attorney, which included stints as counsel to two SEC commissioners.
Crenshaw, Brown said, has “routinely fought to make our markets more fair and transparent.”
Scott, however, cast doubt on some of those efforts, specifically attacking her support for finalization of the SEC’s private-fund adviser rule that was later vacated by the U.S. Fifth Circuit court, which he described as being a prime example of the SEC’s effort to “contort its authority over the private markets.”
“While I have respect for your deep knowledge of capital markets,” Scott told Crenshaw, “I have significant reservations over your nomination.”
“Our capital markets should not be a testing ground for the expansion of the administrative state, and your past actions give me serious pause for considering your nomination,” Scott said.
Brown gave members of the committee and nominees until July 19 to file any final statements or answer questions from committee members, but gave no specific date on which he expected the committee to send its referrals on Crenshaw and the other nominees up for consideration of the full senate. Updates will be posted here.
It’s not clear how much support Crenshaw will get when the committee makes its final recommendation. However, as a Democratic nominee up for confirmation as SEC commissioner – after having just completed a previous term in the job – is unlikely to be rejected by a Democratic majority in the Senate.
