Federal Regulators Trying to Leash and Collar Standard Chartered’s Nemesis, Benjamin Lawsky

The plot thickens! Today, the Wall Street Journal reported that, “Regulators Seek Unity in U.K. Bank Talks.”

If you read the article, a more accurate headline would be “Federal regulators desperate to get in front of Lawsky mob and call it a parade.” All the article says is the mucho unhappy and very much outflanked Federal regulators have gotten a meeting with Lawsky. Just look at the disconnect between the PR in the first paragraph and the actual state of play in the second:

U.S. authorities are forming a group with New York’s top financial regulator to negotiate a settlement with Standard Chartered over allegations it illegally hid financial dealings with Iran.

The U.S. Treasury Department, Federal Reserve, U.S. Department of Justice and Manhattan district attorney’s office are scrambling to reach an understanding with the New York State Department of Financial Services over the ground rules for negotiations with the U.K.’s fifth-largest bank by assets, according to people familiar with the talks.

This is hysterical. “Ground rules for negotiations”? Lawsky does not need the permission of Geithner et. al. to negotiate with Standard Chartered. As long as Lawsky has Cuomo’s backing, he has all the leverage here. And three independent sources told me as of today that Cuomo was fully behind Lawsky. That means he is likely to remain free to operate as he sees fit. It’s a given that if the White House had any real sway over Cuomo and saw fit to intervene, they would have done so by now. There is no downside to Lawsky in going through the motions of seeing if there is a way for him to proceed and have the Feds save a bit of face.

Let me stress again: Lawsky has all the cards, and he must know that. SCB has done an effective job in muddying the waters and making it sound as if Lawksy’s action hinges on his reading of the Federal statues setting forth Iran sanctions (and by implication, who is he to do that when the corrupt and bank friendly Treasury in supposed to be teh lead actor in this arena?) But as we stressed, Lawsky mentions that law as the basis for only one of the seven violations of law he cites (and even then, his reliance on it seems narrow and defensible; the violation is that the bank worked to keep the New York operation in the dark about the transfers so that it could not vet whether they were in compliance with the law). The other six are New York laws. That means the SBC press campaign, to claim that Lawsky is all wet, that only $14 million, and not $250 billion of transactions were out of compliance, is irrelevant even if true.

A Bloomberg story today describes why Lawsky is within his rights to consider revoking the license of the SCB New York branch:

New York’s financial-services regulator has grounds to shut Standard Chartered Plc (STAN) in the state even if he accepts the firm’s argument that it illegally laundered only a fraction of the $250 billion he claims.

As the state’s top banking regulator, Benjamin Lawsky has power to act in his discretion against any financial institution he deems untrustworthy, according to the charter of his year-old department.

Penalties he could impose include fines and the revocation of the bank’s license to operate in the state…

Even if Standard Chartered’s position is legally sound, the order’s disclosure of internal e-mails suggesting a conspiracy to hide the identity of Iranian clients from regulators has given Lawsky grounds to act when the two sides face off at an administrative hearing Aug. 15, according to experts on both sides of the Atlantic.

“I don’t care whether it is a half of one percent that weren’t right,” said Arthur Levitt, former chairman of the Securities and Exchange Commission,…

“There are going to be more that weren’t right…The e-mails are really outrageous. I think Lawsky has uncovered something that probably has a much deeper depth.”…

Neil Barofsky, who oversaw the U.S. Troubled Asset Relief Program and criticized the U.S. Treasury Department in his book, Bailout, objected to the criticism heaped on Lawsky.

“This is not Lawsky getting ahead of other regulators,” said Barofsky. “This is Lawsky doing his job.”…

“Willful non-compliance is very serious,” said Tariq Mirza, a former Federal Deposit Insurance Corp. official now with Grant Thornton. “If those allegations can be substantiated, regulators throw the book at institutions.”

The Bloomberg story also mentions that Treasury is coordinating with other regulators on this case, but that the coordination “may go nowhere” and Lawsky may still act alone.

The problem facing Treasury is it has conflicting objectives. It really needs to look like Lawsky has relented and is working with them, even if the reality is that Lawsky is driving the operation and the other regulators are just attaching their names and some legal boilerplate to the settlement and getting a cut. But they are also offended that Lawsky is engaging in such (by their captured standards) aggressive tactics. Lawsky wants a $700 million settlement. Since any experienced negotiator knows that a good negotiation means everyone does not get what they want, he might accept $500 million if SCB starts acting serious about settling pronto (as least privately).

Lawsky has no reason to cut New York’s piece of the pie smaller to make the lapdog Treasury and Fed look good. So if Lawsky’s bottom number is, say, $500 million, how much do the Treasury and Fed want on top of that to look credible? I doubt Federal regulators would be prepared to have the Federal piece of the settlement be less than New York state’s. But it strikes me as unlikely that Geithner would stomach pushing SCB for a settlement of north of $1 billion (note I have no specific information; this is strictly gut. I think Geithner values preserving decent relations with UK regulators, and they have to be smarting over the way he managed to dump all blame for Libor on them, when price fixing is also a US anti trust violation and US banks were also gaming Libor). Mind you, as Levitt and Mirza stress, the violations look egregious and willful. If Lawsky has other documents along the lines of the ones he cited in his order, I think a number like that is fully justified. I just can’t see a bank stooge like Geithner going there unless he felt there was no way out.

To give another benchmark, International Business Times had a bit of fun determining what SBC’s sentence would be if it were an individual found guilty of these crimes:

If Standard Chartered Bank were indeed a person instead of an international financier, what kind jail time would it be facing?

The International Business Times asked a criminal defense attorney in New York just that question. The verdict: If corporations were truly people, they would be looking at two decades or more in the slammer.

The charges against Standard Chartered, per the regulator’s filing, mainly relate to “falsifying business records with the intent to defraud examiners” and facilitating “unauthorized Iranian transactions.” If the company were an individual, “a quick glance at the alleged conduct indicates two main crimes that would likely be charged: money-laundering and enterprise corruption,” the lawyer said Tuesday.

Under New York state statutes against those two crimes, a defendant found guilty could be sentenced to a penalty of between eight-and-one-third and 25 years. The attorney noted that “it seems likely that a maximum sentence would be given because of the extent of criminality alleged in this case.” And if the judge really wanted to throw the book at them, the attorney explained, they could consider every instance where Standard Chartered Bank engaged in alleged illegal conduct, no doubt hundreds of them, as a “discrete act of criminality” rather than “one criminal transaction.”

Federal involvement would make the possible prison term even stiffer, with the appropriate federal money-laundering statute carrying a penalty of “roughly 15 to 19 years,” and a racketeering conviction “punishable by up to 20 years” in Club Fed.

There is also an article at the New York Times on Lawsky which comes close to being a hatchet job. It does not look as if the Times made any effort to get to anyone in Lawsky’s camp (by contrast, I know of at least one reporter working on a profile who says everyone who Lawsky has worked with him is extremely complimentary). It also has sources that are spinning (one might say misrepresenting) the genesis. It acknowledges that Lawsky discussed his findings and theories, so it undermines the “blindsided claim. We were told three months ago, with the Fed; the article says April, so this is pretty close to the same time frame and sounds like the same meeting. This is the claim in the Times:

Mr. Lawsky said he would act even without the other regulators at a meeting in April after an examination by his office of the bank revealed failures in its compliance with bank secrecy and money laundering laws, according to people with knowledge of the review.

“With knowledge” sounds at least one step removed. By contrast, we are told that Lawsky said he would like to go ahead and the Fed gave its blessing. But this apparent misrepresentation of the Fed giving a go-ahead serves to represent Lawsky as a lone wolf (note he also gave a courtesy call to the New York DA’s office, before releasing the order; that too is used against him in the article).

And let’s be real: do you think this would have gone anywhere if Lawsky had acceded to the Fed and Treasury’s guidance, since both are firmly convinced that there is no such thing as bank fraud? Lawsky clearly took much more rope than the Federal regulators ever imagined he would, but there seems to be reason to think that he did get authorization.

Given that the disinformation is flying hot and heavy on this story, one final point. Don’t expect a hearing next week. Lawsky filed this action fully expecting there would be no hearing. So do not be fooled by the media treating the postponement of a hearing for settlement talks as some sort of victory for SCB or Treasury & Co.. That was the plan from the get-go.

Trust me, I have no doubt Lawksy would be delighted to have a hearing, which is precisely SCB will do whatever it takes to make sure that does not happen (an article at the Times tonight suggests there might be a private hearing rather than a public one, but if SCB is not willing to negotiate, I’m not clear as why it would make sense for Lawsky to agree). Put it another way: if there is a hearing, it means that SCB has come to believe its own PR, which is a very dangerous position to get yourself into when in the middle of a high profile scandal. It will be walking into a buzz saw.

Update: If you are in New York and support what Lawksy is doing, it would be nice to send him a note, particularly since the New York Times has started sniping at him. You can use this form.

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  1. Milton Arbogast

    “It’s a given that if the White House had any real sway over Cuomo and saw fit to intervene, they would have done so by now.”

    Hopefully, hopefully, Andrew Cuomo has been made just as sick to his stomach by the grotesque and disgusting behavior of the Obama Administration toward the “Financial Industry” as any normal human being.

    1. Yves Smith Post author

      I wouldn’t bet on Cuomo’s moral compass. Self preservation will do. Look at what happened in the Congressional mid-terms. The Blue Dog Dems, the bank friendly ones on the same neoliberal page, were slaughtered. The progressives got voted back in.

      Whether he plays progressive or not, there is not much to be gained for Cuomo in aligning himself with Obama. We need a term for negative coattails, but thats’ what seems to happen around him.

      1. emptywheel

        That’s sort of what I’m wondering. What is Cuomo’s goal here? Setting himself up to run the Presidential campaign Eliot Spitzer would have run? And if so is he going to exhibit the same blindness about US bank sanctions violations as Treasury does? (Don’t answer that–I’m pretty sure I know the answer.)

      2. wendy davis

        IMO, at least worth of consideration re: ‘Labour MP John Mann said yesterday that he is fearful of an anti-British bias by U.S. regulators and politicians, who want to shift financial markets from London to New York” is this:

        “The DFS website clearly states that Mr. Lawsky’s objectives for the new department include “keeping New York on the cutting edge as the financial capital of the world.”

        Mr. Lawsky reiterated this objective when he sent a letter in December to New York governor Andrew Cuomo, in which he spoke of boosting New York’s financial services industry. He said:

        “I can assure you that our [DFS’] initial success has increased our determination to achieve even more in the months ahead to contribute to the Governor’s efforts to strengthen New York’s economy and create more jobs. We will encourage financial services firms to locate more jobs in New York.”


        So maybe it’s a two-fer? ‘New Sheriff-of-Wall-Street’ stuff, and Bring Back the Dollar Clearing deals to NYC.

        A little off-topic, but I wish this could all lead to discussions of how often American transnationals have used the UAE, for instance, to covertly sell just about anything to Iran (and likely other nations) under ‘strict’ US sanctions. The hypocrisy is killing.

        1. JTFaraday

          Frankly, that is an astonishing to say as a regulator.

          Does this suggest that the libertarians may be correct–the onetime regulators have been completely captured and now act as industry boosters?

          Someone who promises the Governor he will work on behalf of financial industry job creators (nice excuse) doesn’t seem likely to challenge fraud on the part of NY based financial institutions.

          1. wendy davis

            Unfortunately, Kahlique had no links to either that part of the Mission Statement, nor to the referenced letter to Cuomo.

            This is that page of the site, but…it could have been changed since the 8th; lot of that going around, lol. Or it might have been on a different page altogether.


            Kahlique’s piece does give this part of Lawsky’s bio:

            “Lawsky built up a career in prosecuting white collar crime, organised crime and terrorism cases when he worked as assistant US attorney in the Southern district of New York for five years. Having graduated from Columbia Law School, Lawsky’s legal career kicked off when he worked as chief counsel to US Senator Charles Schumer on the Senate Judiciary Committee and as a trial attorney in the US Department of Justice.”

            But…Schumer? Come on. Well, why not? Pretty poweful dude in the banking world.

          2. charles sereno

            I think Mr. Lawsky presumes that we take for granted the idea that a regulator regulates and, so, that needn’t be mentioned.

            Q: What is the mission of the new department?

            A: It’s really threefold. One is to be the sort of financial services regulator that works closely with the industries we regulate to really help them thrive and create jobs in New York State. That’s mission No. 1.

            Mission No. 2 is to protect consumers and do it better than anyone ever has before. And mission No. 3 is as we merge the two departments, to really do that in a smart, efficient way and be a model of modern, smart, thoughtful government.

            Some people point out, well, isn’t your first goal—to be a regulator who helps these industries thrive and thus create jobs—in tension with your second goal of protecting consumers? And I don’t think they are. I think those two goals are not mutually exclusive. You can protect consumers and do it in a way that creates even greater consumer confidence in the industries we regulate and help those industries thrive as well.
            (From an interview of Lawsky by Jonathon Epstein. http://www.buffalonews.com/business/article801371.ece)

          3. Ms G

            The Lawsky bio mentions that this guy kicked off his career as counsel to Sen. Schumer. What else is there to know about his ambitions, aspirations and potentially political agenda in re banks, financiers, job creators, and the malfeasance of countries that are not friends of Israel.

            Schumer, also, is the local kingmaker for attorneys seeking nomination as judges to the Federal District and Circuit Courts here in New York.

          4. C

            Depends upon what he means by working on their behalf. I would argue a well-regulated marketplace is a more profitable one than a poorly-regulated one which tends to be hit by and then destroyed by asset bubbles. But clearly not all people *cough* Geither *cough* share this view.

        2. Yves Smith Post author

          Tough regulations were seen as pro business and pro employment not all that long ago (20 years). Amar Bhide had a 1994 article in the Harvard Business Review that began, without a trace of irony, saying that the US had the deepest, most liquid capital markets in the world, and one of the big reasons was that tough regulations made it attractive to investors.

          Look, by contrast, at the article I had in Links today on how low stock trading volumes are. A lot of investors are leery of stocks, and one reasons is they don’t trust the markets. HFT, banks (who are a big % of the S&P) having opaque earnings, CEOs spouting how they maximize shareholder value when they instead fixate on quarterly earnings so they maximize their pay to the detriment of the enterprise.

          Good regulation is pro industry employment. It’s just that the industry propagandists have conned you and the public at large into thinking otherwise.

          1. JTFaraday

            “Good regulation is pro industry employment. It’s just that the industry propagandists have conned you and the public at large into thinking otherwise.”

            Good industry regulation is pro industry employment on terms financial sector management and employees aren’t interested in because it won’t make them instant millionaires.

            This is all about an insular group of mutual back scratchers across the financial sector and government. Schumer, Schneiderman, Cuomo, Lawsky–they’re all practically the same person, replicating himself over and over again.

            Nothing has changed here. The con is thinking it has.

          2. Jim Haygood

            ‘A lot of investors are leery of stocks, and one reasons is they don’t trust the markets.’ — YS

            Yes. And a lot of important economies — particularly those in Asia, which need Iranian energy — are leery of keeping assets in a politicized jurisdiction like the U.S., where the unholy coupling of yankee moralism and Israeli Lobby vindictiveness have given birth to Lawsky.

            Like Swiss banks in recent years, SCB is facing a crude U.S. shakedown. Lawsky is a Looter straight out of an Ayn Rand novel.

            When financial centers go rogue as New York is doing, capital leaves.

          3. wendy davis

            Yes, Bill Black often makes the point, and washingtonsblog brings in tons of economist’s quotes to that effect. What isn’t clear is that the regulators care if it’s true, especially when the mainstream financial pages are breaking their necks to gin up confidence.

            And again: I said it might be a two-fer. The more I read, the less sure I am what Lawsky’s motivations are. I hope they are in aid of weeding out bad players, but it’s seriously hard to hear some cost-of-doing-business $700 million fine might settle it.

            But I’d still like to hear the conversation about Iran and the other nations receiving the hidden wire tranfers, and the ways money has found its way around the sanctions. (Not that it’s likely.)

          4. OpenThePodBayDoorHAL

            Yves for President.

            It’s always good to ask “cui bono?”. If good regs are good for Wall St employment and US capital markets, then weak regs are good for whom, exactly? Maybe a coupla dozen Goldman partners and other bank CEOs? Regulatory fines, like QE XXX are now becoming completely normaalzed. Obomba does not believe there is such a thing as bank fraud, it doesn’t exist. Who is pulling his strings tho? Or is he just a self-animated puppet/muppet who happens to be ignorant? Our Basketballer-in-Chief?

  2. JGordon

    Schadenfreude is great feeling, even if it is ultimately futile.

    And lying about reality works in the short term, but eventually it catches up to you. For the criminal elites, I think we’re at the beginning of the caught-up point. I will enjoy watching as they turn on each other like rabid, drooling dogs and fight over the scraps of the dwindling resource pie.

    1. Dan Friedman

      Lying IS the most-used tool for the ‘criminally elite’. I differ however in the course to follow. It will not be the elite turning on each other, but rather the rage of people who won’t stand for being deceived forever.

      That’s when it will end. No pretty words can hide it.

  3. Milton Arbogast

    This is the former WSJ reporter now at the Times who is trying to castrate Lawsky with innuendo and entirely one-sided reporting. She also seems not to have any of her facts straight having referred to Credit Suisse as a “Dutch” bank.

    “NYT hires banking reporter from WSJ 2012 02.17

    New York Times business editor Larry Ingrassia sent out the following announcement earlier this week:

    I am very pleased to announce that Jessica Silver-Greenberg is joining Business Day to cover banking.

    Jessica has been a reporter at the Wall Street Journal since 2010.

    Jessica, who is a 2004 graduate of Princeton, grew up in Los Angeles. She lives in Brooklyn.”

    1. rob

      just out of curiosity ;is Silver-Greenberg the daughter/niece? of any other greenbergs who used to operate at the times and other establishment media orifice.

      AS for patrick fitzgerald,He must be owned at this time.
      while he was atty gen of illinois,from @1998-2000,he was conducting an investigation of two of the soon to have been 9/11 hijackers and their money man;Yasin Al-Qadi.This was a simutaneous investigation with the fbi office in chicago…Since the ill.atty.gen.,and the agents wright and vincent, all were told by the feds to drop their investigations,and did… before 9/11,which is what they had to do.At least agents wright and vincent came out after 9/11 and tried to get the word out that 9/11 was preventable.But fitzgerald has kept his mouth shut.

      also in the valerie plame affair,he allowed himself to be in effectual in a huge thing.An executive branch,who started a war nder false pretenses,that used the outing of a cia asset(considering her role at Brewster and Jennings and their access to the saudi ARAMCO,a big deal ,in itself)as a purely political reprisal against an american ambassador(former)who didn’t go along with the patently false lies spread by the president and vice president along with their neo-con imps….And what did he do.. charged scooter libby with obstruction….nice tag..

      Fitzgerald is sheep dipped or something… but he is “in the loop”

    2. Dan Friedman

      Having worked for 30 years on Wall Street, I can, with conviction, assure you that The New York Times has never once gotten “the story”. Every event that I was either involved with, or had ‘good information’ on, found itself contorted beyond recognition, once ‘reported’ in The NYT.

      I thought the Grey Lady was writing words to border their advertisements. That was the news?

  4. Milton Arbogast

    And please just remember, Patrick Fitzgerald would be the Attorney General of the United States if Barrack Obama was anything except a craven tool of moneyed interests.

  5. Bryan Sean McKown

    “Lawsky” – I love the guy’s surname – as in Rule of Lawsky.
    Thank you Ives; nice work coming out of the Vampire Shift.

  6. Jo

    Oh I sent Lawsky (Geithner puppet, don’t believe – not even for one second – the faux Fed outrage being peddled) a message.

    Lawsky was given an objective and he delivered; whether he’s right or wrong is immaterial, job was done.

    The Obama/Geithner junta don’t like countries who promote fiscal prudence – this currently covers the UK (even though they’re only pretending). Accordingly they will be targeted.

    This is the real story here.

    Love & peace.

  7. Greg R

    I’ve already seen this movie. The role of Benjamin Lawsky was played by Brooksley Born. Treasury, the Fed and DOJ were played by Rubin, Greenspan and Summers.

    1. Lawsky takes a dive in the 4th round

      I saw the sequel to that movie, where Scheiderman was the star: much jubilation and public adulation, then the hero sells out for a humiliating fake job in the federal mafiya state. My guess is, Lawsky’s just another looting-class feint at rule of law.

      1. John G

        My guess is you’re right. I really held a lot of hope for Schneiderman, and to me his turn was extremely stunning and disappointing. Now he’s fully captured but parading like he’s a the populist. It’s disgusting. Still, after he turned, I despaired of anyone stepping up. Even if Lawsky’s doing this just to make a reputation that he can cash in on later, at least he’s doing it. That’s progress.

        1. JTFaraday

          If Lawsky is working on repeating what Schneiderman did, following in approximate form the career pattern Schneiderman laid out, how does that represent progress and not the institutionalization of a pattern of corruption in government service?

          With many little minions to follow, the production of government bureaucracy that doesn’t actually do what it professes to do.

          1. Greg R

            Putting too much faith in one person is a sucker’s bet. Schneiderman is fresh in our memory, but remember Tom Miller on being named to head the 50-state fiasco in 2010?

            “We will put people in jail,” Miller said, in response to questioning. “One of the main tools needs to be principal reductions, just like in the farm crisis in the 1980s…There should be some kind of compensation system for people who have been harmed…And the foreclosure process should stop while loan modifications begin.”

        2. Tim

          That is progress if it becomes the best interest of public servants to do the right thing. It must mean that the 99% are catching on in sufficient numbers to vote in their own best interest.

          I hope this trend continues. If it does then our democratic republic still has a fighting chance.

  8. timotheus

    Okay, I wrote him a supportive note. I wanted to add: Please do not pawn your soul for a seat next to Michelle at the next SOTU address. But I controlled myself.

    1. CaitlinO

      I don’t think control is a good thing at this point. Wish you had included your comment in the note.

  9. polistra

    I’m a little puzzled by the intense need to stop Lawsky. Standard Chartered doesn’t seem to have huge American connections. You’d think SEC would be happy to have Lawsky spend his effort on a mainly British bank; otherwise he might start investigating American banks and stir up real trouble.

    Hypothesis: American contractors have been supplying all sorts of goods to Persia even while we make warlike noises toward Persia. We’ve even been selling them nuclear equipment. Is Standard Chartered part of this supply chain, perhaps with CIA winks and nods? That might explain its importance.

    1. monday1929

      Don’t forget Citi’s exposure for laundering Trillions. They are dead in the water but still have powerful connections.
      Further, they are directly tied into the Security State, at least for now. At some point they will be sacrificed, their operations shifted to another Name. Looking even further out, the same fate may befall the FED, the ultimate “Bad Bank”.

    2. OpenThePodBayDoorHAL

      There’s a different narrative that explains it. The Beast devoured Third World countries resources, people, and balance sheets; then it devoured first-world homeowners, employees, health care users, and retirees; then it devoured Eurozone banks (with the persistent Anglo-Amer media campaign); it’s devouring every other currency bloc in the race to the bottom. Now the US body of the Beast wants/needs to devour it’s own arm, the Anglo arm. Feeding on itself before the final denouement of the snake eating it’s own tail. Then *poof* reverse financial singularity. BenB mints one $10 Trillion coin and purchases the last share of traded stock.

  10. Goin' South

    Why does everyone keep using the word “negotiate” rather than “prosecute” when we talk about how officials should interact with these criminals?

    1. YankeeFrank

      Best question yet. Prosecute first, the negotiate a plea deal that includes decades of jail time for the Deloitte douches and anyone else who conspired to hide Iranian transfers.

    2. Yves Smith Post author

      If you prosecute a bank, you pretty much put it out of business. This is why Spitzer was depicted as a power mad bully. Threatening to prosecute a financial firm means it will cave. It can’t afford to have a prosecution go forward. All sorts of investors and clients (muncipalities, for instance) have to immediately cease doing business with it as soon as the complaint is filed.

    3. CaitlinO

      Agreed. What kind of useless deterrent is $800M on what Lawsky has described as a $250B series of violations?

      These penalties are jokes which make the underlying corruption even more offensive.

  11. JohnC

    I know now how a cockerel feels.

    Did my crowing help the sun to rise?


    Then the STAN imbroglio,

    Now, today, the Guardian with a pile of nonsense about John Major.


    John Major has plenty of form. At Camp David he induced Bush to terminate the SEC inquiry into Lloyds of London, and in return went digging into government files to find dirt on Clinton for the 1992 Election.

    Leonora, if you’re lurking, take a look at the Treason Felony Act.

  12. Jackie B

    Wasn’t it Diogenes who carried a lantern looking for an honest man? Well, I think we have found one.

    1. JTFaraday

      I don’t know, I have some sympathy for people think there is something disingenuous about all this and who suggest it is not about banking regulation but about “Iran sanctions.”

      The mistake they are likely making with regard to that suspicion is in their certainty that this initiative was directly ordered by the US federal government–ie., an official action of the Obama Administration– and could not possibly be of local origins. As if actions taken by the federal government never originate with pressure from factional interests amongst the US population.

      As for Lawsky personally, one would need to examine his record to know if he is tough on the banks all around. I haven’t read anything about that either way, so I wouldn’t know if he is something one might call an “honest man.”

      Regardless, I find myself reluctant these days to give those who have managed to acquire the ability to act in an official capacity the benefit of the doubt.

      Chalk it up to systemic corruption.

      1. Brindle

        This episode fits in too nicely with the Iran-Boogeyman propaganda stream for my sensibilities. I do not know enough about Lawsky to ascribe any motivation other than his professional one at this point in time. Interesting to see how this turns out.

        1. JTFaraday

          Well, it’s just that if Lawsky is like most of the successful “professionals” we see in the 21st century, what his “professional motivation” is in acting within the bounds of his official capacity likely depends on what his professional network is, (or what expanded network he aspires to).

          Chalk such cynicism up to cronyism and activist political networks.

          Thus if I were to pass judgment on Lawsky, in his current capacity as a public regulator as such, I need to know more about his performance in the job beyond this one episode in order to place it into a broader context of regulatory action/inaction.

          This way, we would be able to better discern if it’s possible he is a politically motivated activist regulator because Iran is at issue, or not.

          It’s the first I’ve heard of him so I wouldn’t rule it out, but I also have no way of making a judgment call because I don’t have enough information.

        2. Ms G

          See, e.g., biographical squib posted above by an NC reader highlighting that Lawsky “kickstarted” his career as a lawyer for Sen. Chuck Schumer, Big Amigo of banks, Wall Street generally, and of course Israel.

  13. Warren Celli

    The movie now takes its so predictable turn…

    Clint Eastwood Lawsky — with the “balls of steel” — the high stakes drifter responsible for protecting the Vanilla Greed for Profit gangsters license to steal gang, is suddenly surrounded by the Xtrevilist Pernicious Greed for Destruction gang. Yes — the big gun gangs have arrived in town! Its shoot out time. The fans are roaring and clapping wildly!

    But wait! The scene suddenly changes again. Talk of big shoot out jail time and prosecution now go to fantasy back burner status and settlement and negotiate talk leaps onto the screen.

    The fans are outraged! Popcorn boxes and cold drink cups are flying towards the movie screen as movie goers realize its the same old story line — balls of deception dressed up as balls of steel. Sheesh! Its just another fantasy change slap on the wrist movie.

    But don’t despair movie patrons, you still have LIMITED FREE SPEECH in Scamerica and you can write to Santa and ask for any fantasy change of your choosing, or you can watch the Romney Obama movie for a real live performance of fantasy change in action.

    Are we ready for the election boycotts yet?

    Deception is the strongest political force on the planet.

    1. Yves Smith Post author

      I started getting suspicious when he even though he was the first AG to voice doubts about the settlement and subpoena banks for info, he didn’t file any cases. Masto of Nevada, with a much smaller office who had started later, was. I had wanted to start shooting at him but lacked concrete evidence other than his failure to follow up his initial moves with real action.

      Schneiderman never had been a prosecutor. He did clerk in the SDNY, but that is not the same as actually developing, filing, and pursuing cases.

      By contrast, Lawksy has long been a prosecutor. Those guys like pigfights.

  14. brian

    any bets they have offered lawsky the opportunity to sit next to michelle at the next state of the union?

  15. kgw

    So where is the “regulator” for the United States? I agree with one of the bank in question’s officers who said something to this effect, “you f**cking Americans, who are you to tell us who we can do business with?”

    The U.S. is the “roguest” entity on the planet: they can speak no truth. They have zilch authority. . .

  16. aeolius

    Thank you for Lawsky address. I emial him and Cuomo. In part I said
    They only way is to jail those at the top.Change King and Sand’s shirts to black, give then some bling jewelry and you have the Mafia. Pure and simple. Amoral and rapacious.The usual procedure of them agreeing to change is absurd. Treating tem like “Gentlemen” is absurd. Threat them as you would treat any street criminal. Perp walk and all.
    . I do think the term British Bank Mafia is appropriate.

    Asfar as Cuomo’s motives, one must think back to 1984 when his dad, Mario decided not to run for President. I assume for a skelton.
    But Andrew has always had the look as if he were Presidential Bound.
    The only good way to win in 2016 is to pry the Tea Party from the 1%. From this perspective the BBM is a great palce to start. From SC and HSBC on money laundering and Iran to
    LIBOR and then to the US banks. All on a States Rights basis. Helped out by a little Punch and Judy theater with Obama over Fed versus States rights.
    It looks like a Mario move.

    1. JustAnObserver

      aeolius: … and then to the US banks ?

      After that “Mission Statement” recorded above ??!!

      Oh please spare us the naivete, this blog’s for grown-ups. Even the trolls do better than that.

  17. Hugh

    “Regulators seek unity” That use of “unity” is a great Orwellianism. It is the unity of selling out together.

  18. Phichibe

    I can only hope that this pissing war escalates to DefCon1 (full bladder evacuation), and that the rumors of threats of potential British revalations against one or more American banks’ peccadilloes prove to be true. Sadly, I suspect that if, indeed, the Brits have the goods on an American bank then yet another “thieves’ bargain” will prevail among the banking class and its stooge regulators on both (all?) continents. Seldom is Ben Franklin’s admonition to “hang together or assuredly we will hang separately” more tightly adhered to than among these gangsters.

    I have yet to see any signs of moral courage among Cuomo, pere (Mario was noted for sanctimonious agonizing on moral issues of the day but I never noted that he did much in way of acting on them) or fils. Andrew has thrown organized labor under the bus, joined the “cut taxes” crusade for upper middle class votes and contributions, and generally acted like a 2nd tier Don in one of the later “Godfather” movies. It wouldn’t surprise me in the least that Andrew and his advisers are chuckling over this brouhaha, swilling $300/bottle Scotch in the late afternoon in Albany and calculating the optimal yield curve for Wall Street contributions vs. when they collar Lewsky and force him to yield to the Powers That Be, not least of them the New York Times itself.

    What I love most about the Times is the indescribable air of smug satisfaction that exudes its self regard. The late Harrison Salisbury titled his love-poem to his employer “Without Fear or Favor”. Words fail me. Pity they didn’t fail him, or his latter-day descendents.


    1. Yves Smith Post author

      He doesn’t need moral courage. This will be VERY popular with pro-Israel donors, which is a powerful group in NY. In fact, that’s one reason the White House dares not go into open opposition on this one. They don’t dare piss them off. This is almost certainly a cold blooded political calculation, which means the odds are pretty good that Cuomo won’t back down.

      While I am not a fan at all of US’s Iran policy, I don’t see this as feeding the fires (this is a past violation and the financial sanctions have since been tightened further). Notice how this is being treated as a business story, not a MIddle East story.

      If anything, it might simply divert $ from other candidates to Laswky and Cuomo (as in not increase net donations, just shift allocation).

      1. Phichibe

        Yves, you give me hope (which is not the emotion I typically enjoy following my daily perusal of NC – always I’m enlightened but not often hopeful). I will watch this development closely, and if you’re right this may be one of the few instances where the totally corrupt system of American campaign contributions works in the interests of the public as opposed to the interests of 1%.

        Vive la Revolution!


  19. Jim Davey

    I know the ground rules to negotiate …. its called an indictment ….. works every time. (Dah, what the heck are those people thinking?)

  20. C

    I would suggest writing even if you are not a NY resident. He is, after all, doing the job our federal regulators are supposed to be doing and it would be nice to thank him for it. And, by the same token, it would probably enhance his standing with Cuomo if his office can show Cuomo this has national legs and national support.

  21. smellslikechapter11

    After reading Lawsky’s bull (like the one that Martin Luther posted on the door of the chuch), I would be a lot more worried if I was a partner at Deloitte than anyone at SCB.

    If Bush had the balls to prosecute Anderson for Enron, then it doe not seem like a big strectch her for either NY or the FEDs to do the same for Deloitte.

  22. bluntobj

    I wonder if the transactions are a type of “arms for hostages” deal ginned up by people in power, only with cash and nuclear technology as the stakes and some very very elite 1%’ers in the current government involved?

    Where’s my tinfoil hat?

  23. LeonovaBalletRusse

    YVES, you started something big:

    Gloves off? Felix Salmon of Rueters, 10Aug12 Tweets a line and a link:


    “A New York hedge fund “loaned” the millions Zanu-PF needed to crush the opposition Movement for Democratic Change’s victory in the 2008 elections.”

    “Ochs-Ziff” is the name implicated. Okey dokey.

    Will the SCB “weekend meeting” be framed from the sidelines?

    1. Ms G

      Leonova, you put your red shoes on again . . . and you are back! Now stay awhile, you’ve been missed.

  24. enouf

    To me, this all smells like a big distraction;

    Headlines are never what should be the *real* headlines; this is just a diversion, a side-show to keep the focus away from the truly egregious sinful and rapacious acts;


    which lambert posted in ‘links’ a few days back…

    Along with the Iran drum-beating (trust me, the link to iran will be made and played in upcoming times) — just look at how this is the 3rd or 4th main article concerning this *particular* story here at NC in just a few days *(not said in a disparaging way, just to point to facts).

    antidote du jour;
    (“Fooooccccuuuus!” see 1:12 into it http://www.youtube.com/watch?v=oQm_8vX3sYU Jeff Dunham and Peanut),

    Granted this is a financial times blog (and i thank you for that), and considering any and all MSM makes me violently ill whenever i attempt to watch/listen, I cannot be certain of my exact distraction reasons, but i’d bet the farm that the Fracking issue is nowhere near being aired on MSM as much as this story.


  25. R Foreman

    I can see we have a winner here (any time Yves takes such active involvement and glee in the comments section). :)

    I sure hope a $700 Billion loss doesn’t cause a chain reaction of losses in that dark cess-pool called the off-balance sheet banking derivatives parlour. :))) gee we won’t know of course, until we start seeing those external secondary explosions. Are these events and the recent (as in yesterday) announcement of system collapse warnings at all coincidental?


  26. Milton Arbogast

    You can’t make this stuff up:

    “Standard Chartered Case Casts a Chill Over Banks
    Published: August 10, 2012

    Money laundering accusations leveled against a British bank by New York’s top banking regulator are causing global banks to worry that their New York operations could make them public targets for processing transactions already deemed legal by federal regulators, according to federal authorities with knowledge of the concerns.”

    Old Jessica has been royally paid off. How, I don’t know. But the clear implication that Lawsky, Lawsky!, is breaking the law is truly stupendous.

  27. rafael bolero

    Screw all these ‘settlements.’ All it settles is that the crime can continue. Put these ‘traitors’ in prison and let Manning out.

  28. Nacho

    Anything, ANYTHING traitor-Tim Geithner wants the American public is against.

    He better be watching out for falling pianos.

  29. Schofield

    So no matter who you vote for Democrats or Republicans you are effectively voting to install a bunch of crooks to run the United States. So much for the glorious American Revolution which has turned out to be very inglorious. As crooked as the eighteenth century British administration it replaced. As the French would cynically say “Plus ça change, plus c’est la même chose.” The more things change the more they stay the same!

  30. Bridget

    Let us pray that Mr. Lawsky does not display the same sort of weaknesses as did Client Number Nine.

  31. Amazed

    I’m amazed the complete lack of due process that exists in the Big Government regulatory scheme. Any of thes regulators (e.g. financial, EPA, etc.) can shut companies down, destroy capital, reputations, and livelihoods on the whim of some bureaucratic clown. The US is just another Banana Republic – although one with a big military than can also (on a whim) invade a country and kill hundreds of thousands of people as it did in Iraq! The only candidate with any handle on this is Ron Paul – which is why I’m voting for him!

  32. LeonovaBalletRusse

    Will “the strong arm of Lawsky” (coin now in circulation) reach as far as it should, to permit the State of New York to become the Deep Trust Model for Bona Fide Finance in the New Economy C.21? May the intrepid leader, Mr. Benjamin Lawsky, review the following video in its entirety, to keep his memory of American Potential green. What great leaders have done before, brave leaders can do now. Review:

    http://www.youtube.com/watch?v=fEqkphVOkHc&feature=related — for “The Secret of Oz…” (by iHelo58 on Mar 26, 2011) on YouTube.

    It is past time for We the People to be our own boss when it comes to OUR money, The People’s Money. What shall our new “colonial scrip” be called? Will the future President Andrew Cuomo and Vice President Benjamin Lawsky bring it on? Will Yves Smith be the Treasurer of the United States, and Michael Hudson the Secretary of the Treasury, under these champions of New American justice by Declaration of Independence from foreign central banker tyranny?

    Benjamin Lawsky and Andrew Cuomo have the power to redeem the Rule of Law in America in a New York minute! Next Wednesday, let the Revolution for Economic Justice in America be ascertained by “the long arm of Lawsky” acting on behalf of We the People in C.21. One just man can save the world.

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