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Senators Question Activist Investor’s Influence on Regulation of AIG

AIG Building

(Photo: Evan El-Amin / Shutterstock.com)

Last week, two Senators expressed their concern that Carl Icahn, prominent investor and special advisor to President Trump, might be trying to influence the regulation of AIG. Senators Elizabeth Warren (D-MA) and Sheldon Whitehouse (D-RI) raised important questions about potential avenues through which Icahn might have influenced a regulatory decision of the Financial Stability Oversight Council (FSOC), which coordinates the financial regulations meant to protect the public from the next financial crisis.

Icahn holds a significant stake in AIG, which is one of the few non-banks designated as a systematically important financial institution (SIFI)—in other words, too big to fail. This designation subjects AIG to stricter regulations, the costs of which had led Icahn to declare AIG “too big to succeed” and to call for a breakup of the company in 2015.

Last month, Icahn changed his position on AIG’s size. He claimed this change of heart was due to new leadership.

Recent events gave Senators Warren and Whitehouse a reason to question Icahn’s claim. In their letter, they noted that Icahn had lobbied for “radical change[s]” in environmental regulation that would have benefitted his investments. They also noted that Icahn had met with Jay Clayton, the new Chairman of the Securities and Exchange Commission and a member of FSOC, after Clayton’s nomination

Citing Icahn’s lobbying track record, as well as his interaction with Clayton, Senators Warren and Whitehouse suspected that Icahn may have provided input on AIG’s SIFI status. If AIG sheds this designation, he stands to profit from the resulting reduced regulatory costs. The Senators sought “assurances that Mr. Icahn has not provided input on or received information on the pending FSOC decision on AIG’s SIFI status.”

The Project On Government Oversight (POGO) had raised similar concerns in an April letter to White House Counsel Donald McGahn. The White House had appointed Carl Icahn as the President’s special advisor on regulatory reform rather than hiring him a special government employee, which would have made him subject to the ethics requirements of that position. We wrote, “The ethical gray zone that Mr. Icahn operates in may continue to be a lightning rod for critics. There will continue to be legitimate questions whenever he—as the President’s Special Advisor—takes actions or participates in decisions that would benefit his business interests.”

Now, it appears that lightning of senatorial suspicion has struck.

Conflicts of interest should not be allowed to shape regulatory decisions, particularly regarding a company that received $152.5 billion from bailout programs. So long as Carl Icahn sits in an “ethical gray zone,” any potential or suspected influence he may have in governmental decisions deserves scrutiny. POGO’s April letter to the White House Counsel offers two ways to mollify concerns about Icahn’s ethical status:

“We urge the White House to either: 1) Convert Mr. Icahn to a special government employee who is recused from any matter where he has a business interest; or 2) Remove his title and take other actions, such as clarifying that he does not have a portfolio of government responsibilities or speak for the administration, to ensure that he solely acts as an informal advisor to President Trump without crossing or skirting the line into becoming a de facto special government employee.”

While the White House didn’t implement our suggestions then, perhaps now would be a good time to reconsider.

By: Albert Chen
Intern, POGO

Albert Chen is an intern with the Project On Government Oversight.

Topics: Government Accountability, Financial Sector

Related Content: Ethics, Improper Influence, Congressional Oversight, Conflicts of Interest, Financial Oversight

Authors: Albert Chen

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