Issue of the week: Victory for a bank watchdog

A New York state financial regulator accused a London-based bank of laundering $250 billion for Iran.

“Well, that was quick and effective,” said the New York Daily News in an editorial. Just last week, a little-known New York state financial regulator, Benjamin Lawsky, accused the London-based bank Standard Chartered of laundering $250 billion for Iran. His action infuriated Federal Reserve and Justice Department officials, who accused him of leapfrogging—and possibly endangering—their own investigations. But this week, Lawsky extracted a $340 million settlement from the bank. So, despite being labeled a “rogue regulator” by some in the financial press, “Lawsky did the job.” What a vindication, said Kevin Roose in Lawsky, who’s been on the job for only a year, was unfairly cast as an overzealous “cowboy in the world of Wall Street crime-busting.” This impressive victory is proof that he’s not simply “an attention-seeking arriviste.”

Don’t be so sure, said The Wall Street Journal. Lawsky is hardly “some kind of superhero.” Settlement or no, the bank continues to contest his allegations, and other regulators suspect that $249 billion of the $250 billion in transactions in question “were legal at the time they occurred.” The bank had been cooperating with the feds when Lawsky jumped the queue to “get a big publicity score” and further his future political career. He left Standard Chartered no choice but to settle, said Hester Peirce in Otherwise, its New York branch, which does close to $200 billion in transactions every day, would be immediately closed. With that much at stake, settling seemed far better than pleading innocence “before an agency that had already determined the bank’s guilt.” This affair simply proves that matters involving complex issues of foreign policy and national security should be treated by federal regulators with the “requisite experience.”

But Lawsky appears to be the only U.S. regulator actually doing his job, said Mark Gongloff in Who has faith in the feds being tough on banks? Just last week, Morgan Stanley got off with a $4.8 million wrist slap for a price-fixing scheme that cost New Yorkers $300 million, and we learned that Goldman Sachs will face no criminal charges for betting against its own clients during the financial crisis. Lawsky’s stand was “refreshing,” said Jonathan Weil in “Federal regulators and prosecutors are the ones who created the power vacuum here, by going so soft on the banking industry for so long.” Four years after the crisis, we’ve finally found someone willing to hold the financial industry’s feet to the fire.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.


Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Continue reading for free

We hope you're enjoying The Week's refreshingly open-minded journalism.

Subscribed to The Week? Register your account with the same email as your subscription.