“Pursuant to the statutory powers vested in him by the People of the State of New York . . . [and] extensive investigation included the review of more than 30,000 pages of documents, including internal SCB [Standard Chartered Bank] e-mails that describe willful and egregious violations of law.

For almost ten years, SCB schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees. SCB’s actions left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.

-NYS Department of Financial Services


Benjamin Lawsky, head of the New York State Department of Financial Services, has declared that the Treasury Department and the Federal Reserve is “too corrupt” to be involved in NY’s actions against money launderers and Iran sponsors at Standard Chartered bank.

At least, that corruption is what was implied by his actions (note those are my words, not his). Lawsky refused to give Tim Geithner or Ben Bernanke or anyone else at Treasury or the Fed any advance notice of pending legal/regulatory actions. Sorry, Treasury, he seemed to be saying, but your track records preceded you.

Good for him.

I wish more state regulators, attorneys general, and banking supervisors would distance themselves from all Federal relations. At least, until the regulatory incompetence, which came into full flower under George W. Bush and continues unabated under Barrack Obama, com es to its miserable end. We have a Republic, with separate rules for state and national regulations. It is apparent to all that nearly all Federal regulators, other than the FDIC, have dropped the ball.

Start with the corruption of the Treasury department going back to Robert Rubin. His tenure, working in concert with Alan Greenspan and Phil Gramm, was where the office of the Treasury Secretary turned into a Wall Street subsidiary. The revolving door policy was in full view. Once Treasury was corrupted, it was a short hop to the rest of the oversight infrastructure taking their level of regulatory capture to new levels. That would be during the BUsh administration.

This Treasury Department, like the one that preceded it, along with Congress and the White House, have proven themselves to be utterly incapable of overseeing the banking industry. Rather than adhere to this betrayal of the public trust, Mr. Lawsky decided to do something amazing: He actually followed the law. The rest of the regulatory sector should take note.

Have a read of the paragraph at the top of this page to see how prosecution of banking felons and their crony capitalist allies is supposed to be done.

We live in the Banana Republic formerly known as the United States. Its time to turn this nation back into a Democracy . . .


August 6, 2012: In the Matter of Standard Chartered Bank, Order Pursuant to Banking Law § 39

Treasury Department and Federal Reserve were blindsided and angered by New York’s banking regulator
Carrick Mollenkamp and Emily Flitter and Karen Freifeld
Reuters, Wed Aug 8, 2012

Category: Legal, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

33 Responses to “NYS Bank Regulator to Treasury: Drop Dead”

  1. Conan says:

    Barry, Thank you for defend the concept of a Republic, many people wish for a Federalist country.

    Lastly I hope that the same people you mention go after these financial crooks that the Federal powers to be have let have a free pass (some may argue with all the bailouts even paid them for their bad behaviour)…..Time is running out if we don’t see some Perp Walks soon, the statute of limitations will let most of these folks go free.

  2. Moss says:

    Blindsided and angered because they had no intention of confronting them. I am sure that a massive campaign by the British media and other banking surrogates will attempt to discredit the allegations.

    The lack of prosecution has decriminalized banking fraud. The banksters have no trust in each other because they all know what lurks within. The corrupt status quo must be confronted.

  3. sblitz says:

    good for you, good for nys, you are 100% correct. for a number of years i worked at money management firm that had a nys banking licence and the regulators would come in yearly to look over things and they were professional and thorough. as for treasury it is a sham and shame on obama for not firing geithner and asking for dudley’s head as well as bernanke given all their talk about managing macroprudential risk and then we get mf global and the london whale. they aren’t doing their job, they can’t, they are part of the system and the president should show leadership and make some changes to show he is in charge. but sadly he isn’t. thank you for this blog today….it is about time

  4. Winston Munn says:

    The war on the republic will not be won as long as the Supreme Court places dogma above reason. The separation of powers and equality of that power is critical to a functioning republic; the government was never intended to be “Mr. President and the Two Dwarfs”.

    The demise of democracy is a state of perpetual war.

  5. rd says:

    It looks like it will take State AGs and banking regulators, along with local municipalities suing over LIBOR fraud to finally make a start in cleaning up the financial system.

    The London Whale, MF Global, Knight (and many more) show that very few lessons were learned from 2008-2009. The financial sector is addicted to easy leveraged money crack and won’t change their behavior without a forced intervention (addiction analogies are probably more appropriate than anything else I can think of). However, most addicts impact just themselves and their close associates when they have a crisis. The financial sector has shown that it can blow up the world’s economy with its addictions.

    Obama, Tim Geithner, and Eric Holder should stand up and say “Just Say No!” instead of hiding behind campaign donations.

  6. Lee Adler says:

    It’s Time To Fire The Worthless Feds

    “This Administration’s failure to pursue and prosecute the massive criminal frauds that were the root causes of the credit bubble and financial collapse, and that continue to this day, have been persistent and willful. ”


  7. Dow says:


    Nothing has changed.

  8. VennData says:

    Think the NY regulator might be more interested in the media attention than some high-minded moral purpose in “not doing business with the Feds?”


    BR: No

  9. dead hobo says:

    Good start but your analysis is too shallow. [BR: WHat analysis?] Nobody on Earth goes out of their way for someone in a situation like this unless they have something to hide. The Fed and the Treasury aren’t being supportive idiots. They wouldn’t have gone on the offense if NY was making a simple mistake in their review.

    They have something to hide and NY is blowing it for them.

    My realistic suspicion is that the US will approach NY and ‘explain things to them’. All manners of pressure and ‘secret inside information that involves national security’ will be expressed and NY will fold up the tent in a couple of weeks saying that everything was a mistake. Another central bank bullshit play appeasing the worst elements in finance succeeds. Just wait. Some conspirator will state ‘Patriot Act’ and use it to invoke the cover up.

  10. Robespierre says:

    I’ll hold the celebrations until I see US bankers prosecuted…

    As for Obama, Bush, Geithner etc there are nothing more than the drivers of the getaway car of all these bank robbers. Helping them scape after perpetrating all these crimes

  11. gloeschi says:

    Mr. Ritholtz:
    We will not take your allegations lightly. Upon our next inspection, we will implant a trading bug in your trade execution system which will deplete the assets of your customers within seconds. “See what happens, Barry, when you f$&* a stranger in the a%%”? (Hint: have you heard about Knight Trading?).
    The SEC (Sociopaths, Evil and Corrupt)

  12. Dima says:

    Thanks for posting this Barry. Mr. Lawsky and the NY State banking regulators deserve our support for applying the rule of law to Standard Chartered. The Federal Government will need some major spin justify helping a bank that aids and abets the enemies of the people of the United States.

    …. and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security

    Thomas Jefferson – Declaration of Independence

  13. BusSchDean says:

    Barry…thanks for this.

    As you know, my job is to advance business education — to help prepare the next generation of business leaders and followers. Too often the gap between between theory and practice feels like the Grand Canyon. It does not have to be that way. Regulated, competitive markets are things of wonder. Now we have to wonder how to get them back in some key industries. Hats off to anyone who can surprise the leadership at the Treasury and Fed by actually enforcing the law. Perhaps this would happen less if these leaders were less cocksure of themselves.

  14. cpd says:

    So true. I’m afraid to watch how this plays out. If Treasury and the Fed manage to manipulate this to meet their corrupt goals and discredit Lawsky in the process, it will be a very sad day. Unfortunately, there aren’t enough people engaged in these issues to call out the crooks. And the fact that the mainstream media probably won’t go anywhere near this story doesn’t help.

  15. JMelville says:

    Why is it always a foreign bank that is getting slapped? Guess I just have my Martin Armstrong on this AM.

  16. MayorQuimby says:

    Great article Barry. We are a Republic of course, not a Democracy. But I forgot the order of operations last week so I suppose we are all dumber than fifth graders.

  17. MikeDonnelly says:

    Time for Obama to take Lawsky and dump him into the Residential Mortgage-Backed Securities working group with New York attorney general Eric Schneiderman. So they will both never be heard from again.

  18. machinehead says:

    ‘We live in the Banana Republic formerly known as the United States.’

    That’s for sure. It’s a place where a powerful lobby can get crushing, counterproductive sanctions applied to Iran … and one state regulator with his own agenda can hold an international bank hostage for alleged offenses which have absolutely nothing to do with the U.S., other than the presumptuous extraterritorial sweep of its lawskys … errr, LAWS.

    I vomit in his general direction.


    BR: I haven’t the foggiest idea what you are referring to . . .

  19. Conan says:

    Looks like Standard Chartered Bank was manoeuvring to to get a deal from the Feds. History would suggest that they would have gotten a good deal. It also appears that the NY Prosecutor Lawsky wanted full disclosure, which the Feds are definitely opposed to.

    Regulators irate at NY action against Standard Chartered

  20. …Financial Fraud Conviction Scorecard:

    Bush: 1300+, Clinton: 1000+, Obama: 0.0 (+/-)

    Meanwhile, not a word of complaint from a single Democrat in Congress, which is especially infuriating given the broad bi-partisan agreement among voters that criminal bankers need to do time. Too concerned with keeping up appearances and the next election cycle, neither side of the false left-right paradigm of American politics is capable of exposing its own filth when it comes to legitimate scandal, and this DOJ non-prosecution madness involving Goldman Sachs certainly qualifies as sordid.

    Unfortunately, since it appears to the mainstream media that this is a partisan issue, and Obama is the anointed one, this story will get zero coverage.

    DOJ Corruption Report via The Daily Caller


    though, to the Post..

    started well, w..”…We have a Republic, with separate rules for state and national regulations. It is apparent to all that nearly all Federal regulators (have aligned Themselves with an on-going Criminal Enterprise..)

    though, w..”…Its time to turn this nation back into a Democracy . . .”

    We may care to, really, Wonder..





    BR: those numbers under Bush & Clinton look awfully generous…

  21. lonr505 says:

    “Obama, Tim Geithner, and Eric Holder should stand up and say “Just Say No!” instead of hiding behind campaign donations.”

    Since 1/2009, Obama has shown not to have any backbone when dealing with basic rule of law, Republicans or the mega-banks.

    Whether this is because of incompetence, cowardice or a reflection of Obama’s personal feelings is anybody’s guess.

  22. ndmaster says:

    Barry- great article, but come on, you know we’re not a Democracy. We’re a representative republic. Small, but important difference.

  23. riley says:

    “Rather than adhere to this betrayal of the public trust, Mr. Lawsky decided to do something amazing: He actually followed the law.”

    Hopefully he continues to follow the law and we see handcuffs, prosecutions and a revocation of Standard Charter’s corporate charter. However history says the bank will pay a small portion of the profits made from these transactions as a fine (otherwise known as bribe the regulators), congress will pass thousands of pages of unrelated regulations to prevent this sort of activity from happening in the future and the regulators will tell us how they are cleaning up the banking industry.

  24. sparta47 says:

    FINALLY, now go after the U S Banks for what they did from 2004 to 2009.

    The Comptroller of the Currency, Treasury, Federal Reserve & the Department of Justice at best were compliant leading up to and during the Financial Crisis.

    They have continued to do the bidding of large banks. They believe it is critical to maintain confidence in our financial system even if it is corrupt. The charade must continue. The emperor looks great in his new clothes. The taxpayers aren’t smart enough to know better, they are sheep.

  25. James Cameron says:

    > Have a read of the paragraph at the top of this page to see how prosecution of banking felons and their crony capitalist allies is supposed to be done.

    I think it very much remains to be seen to what extent bank executives are charged and prosecuted in this case . . .

  26. zola says:

    I read an article on this earlier today and then read the post, and I can’t help but think it sounds an awful lot like a dysfunctional family who is mad at the child for reporting the child molester….

  27. dead hobo says:

    BR observed:

    Good start but your analysis is too shallow. [BR: WHat analysis?]

    This is what’s known as a figure of speech. Also, when you referred to the subjects as part of a Banana Republic, this was a conclusion. A conclusion concludes an analysis. Also, I think you were too kind by leaving off the obvious question: Why do they want them to slow down and/or stop instead of jumping on the NY bandwagon? Since NY got to the bottom with far fewer resourced in only a few weeks or months, then why are the combined agency resources of the Federal Govt standing there with piss on their legs?

  28. willid3 says:

    while it seems the Feds were asleep (at best) at the wheel, can’t really say that depending on states to do the ‘right’ thing is very likely. or at least most of them any way. remember that the states were heavily involved in that foreclose fraud ‘give away’. and in some cases (Florida? Texas?) expecting the states to actually do any thing about business fraud, is hoping against hope

  29. sparta47 says:

    Encouraging to see State regulators investigating large banks.
    Won’t they run into roadblocks from DC regulators?

    Didn’t the Comptroller of the Currency intervene on behest of national banks to prevent State Attorney Generals from investigating abusive lending practices in the mortgage market pre Financial Crisis?

    I believe the intervention involved a court order telling the AG’s to back off & the OCC would do the job of regulating the banks. A fine job they did, just as the banks wanted.

    Who knows maybe the Financial Crisis would have been mitigated if the AGs had been permitted to do their job independently of DC.

    Good to know our DC regulators represent the US taxpayers.

  30. philipat says:

    But it’s interesting that all the problems identified to date by US Regulators are with non-US Banks? Perhaps this because, as we know, all the US Banks are totally honest and just doing God’s work?

    If not, I suspect that we might shortly hear from the FSC in The UK regarding irregularities involving some US Banks?

  31. Henry Hub says:

    Well, all of a sudden we hear from Benjamin Lawsky, head of the New York State Department of Financial Services. Where has he been, I have to ask. With all of the the dishonest practices, fraud, and thievery we haven’t heard a peep out of Mr. Lawsky. So why now? Could it be that this bank has gone against the only interest that really counts: Israel. Israel wants to tighten the screws on Iran. So, although all other illegal practices are over looked, this on can not be. Cross the interests of Israel and pay the price.


    BR: Yes, its the Jews. Up next, we get the latest market forecast from the Klan.

  32. Henry Hub says:

    Barry, sorry I offended you with my comment. I’m a big fan of yours. The Israel lobby is a power force in this country. But this statement isn’t meant to offend Jewish people.

  33. Oral Hazard says:

    The Iranians still owe $6 billion to 9/11 victims. New Yorkers are a little sensitive about that whole mass murder thing. Go figure.