The knives are out for Benjamin Lawsky, New York’s top state banking regulator. This week the financial press has been full of nameless, faceless critics from the federal government anonymously attacking him for going it alone with money-laundering allegations against the U.K. bank Standard Chartered Plc. Give Standard Chartered’s executives credit: At least when they have blasted Lawsky, they have shown the guts to do it on the record.
Whatever you think of Lawsky’s threat to strip Standard Chartered of its New York state banking license, one oft-repeated criticism is so off-base it’s crying out to be set straight. That would be the notion that Lawsky, the superintendent of the New York State Department of Financial Services, did something improper by releasing his Aug. 6 order against Standard Chartered without warning the company ahead of time that it was coming.
“The order we received from the DFS came as a complete surprise,” said Standard Chartered Chief Executive Officer Peter Sands during a conference call with reporters this week. “The surprise was in the manner of the announcement and that the DFS made an announcement on its own and without giving us prior notice.”
Here’s the appropriate response to that: Good.
We’ve seen this sort of whining before from a big bank on the receiving end of an adversarial regulatory proceeding. In 2010, after the Securities and Exchange Commission filed a civil lawsuit in federal court accusing Goldman Sachs of securities fraud, Goldman officials complained they were blindsided by the suit. And thank goodness they were. Because you know who was sitting on Goldman’s board of directors at the time? Rajat Gupta.
Remember Gupta? He was convicted in June of securities fraud for leaking inside information to hedge-fund manager Raj Rajaratnam -- including market-moving inside information about Goldman. Gupta already was under investigation for insider-trading when the SEC filed its suit, which sent Goldman’s stock tumbling. (Goldman later settled the case for $550 million.)
Considering that Standard Chartered shares fell as much as 31 percent on the news of Lawsky’s order, it wasn’t unfair of Lawsky to keep his plans a secret beforehand. It was prudent.
(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)
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