Recent Articles
Is Promontory Financial Group the ultimate launderer-for-hire?
Standard Chartered has reached a settlement with the New York Department of Financial Services over its transactions with sanctioned Iranian entities. It has agreed to pay $340 million in penalties to the relatively new, previously obscure regulator whose dramatic action against the British bank has catapulted it to the global stage.
Yet there’s something quite odd about the whole affair. Continue Reading
What comes of the drought?
Droughts are scarier than other natural disasters because, unlike earthquakes, tsunamis or tornadoes, they’re measured in months and not minutes. Biblical and doom-filled, they have the basic power to wipe out any civilization by depriving it of the thing we need most: water.
We’re told that most of the farmland in the US is suffering from drought and that the corn crop is most at risk. What are the implications? Deere, the tractor company, has released its third quarter earnings and shed some light on the situation. Continue Reading
In which Jamie Dimon agrees that his bank is too big
Today the Washington Post has a story on the suicide epidemic that is sweeping Greece, Italy, and Ireland. Ariana Eujung Cha writes that “so many people have been killing themselves and leaving behind notes citing financial hardship that European media outlets have a special name for them: ‘economic suicides.’” She also points out that “studies have estimated that people with employment difficulties are two to three times as likely to commit suicide than the population as whole.”
America’s economic problems were caused by a different set of circumstances than those in Europe. Yet we have one sad fact in common: millions of people are having trouble finding work. And many of them will eventually kill themselves because of this. Continue Reading
Banking takes the baton
The London Olympics have ended. The bankers who had been working from home for the past two weeks can now return to their perches in Canary Wharf. Yet while the athletes and spectators have left town, the nationalistic flag-waving in the banking world is only just getting started. Continue Reading
Standard Chartered proves regulators’ true power
A New York State banking regulator, that almost no one had heard of until now, singlehandedly knocked $17 billion off the market value of Standard Chartered Bank. Benjamin Lawsky of New York’s Department of Financial Services did this by threatening to take away Standard Chartered’s New York State banking license. This would be the punishment for what DFS says was a long-running scheme by Standard Chartered to get around US sanctions rules prohibiting dealings with Iranian entities.
As Yves Smith points out, Standard Chartered could also lose the right to perform dollar clearing transactions. This would make it nearly impossible for the bank, which concentrates on Asia, Africa and the Middle East, to facilitate US dollar transactions for its international clients. In other words, it would be a mortal blow. Hence the huge fall in the company’s stock.
This show is just getting started. As Smith says, huge questions loom over the role of the other, larger US regulators who knew about and were dealing with Stan Chart on these allegations…but apparently not with the same sense of drama as Lawsky and the DFS. How and why did Lawsky beat them to the punch? Were they asleep at the wheel? The New York Fed, the Treasury and others have got some explaining to do.
Although we’re far from a conclusion on this matter, we should keep this episode in mind the next time we’re tempted to say that regulators are powerless to stop misbehavior by the banks. For all of the banks’ firepower, deeper pockets and smarter staff, regulators do still hold the ultimate power over banks: that of life and death.
