Friday, 10 August 2012
Food fight among the 5 families
There is a fascinating case roiling the financial pages involving a bank called Standard Chartered and its willful and highly lucrative violations of the sanctions imposed on Iran. The sanctions themselves are part of our next nefarious, undeclared war against a non-enemy, but they are the law of the land. Therefore, helping the Iranian regime get around them is, like laundering drug money, highly profitable.
As we have seen repeatedly, Geithner and Obama are indifferent to banking crimes, but at the same time the entire political class is also fanatically committed to making the Israelis happy in all things. So here is where two immovable forces hurtle down the train tracks at each other: bank crooks defrauding the system (great, where’s my cut?) v/s bank crooks defrauding the system by helping Israel’s enemies (how dare you? pillory them! hang them in the public square! etc.)
The twist is that the regulatory action against SCB was issued by a tiny player, the New York State Department of Financial Services, not the Federal Reserve or any of the other big oversight agencies. That’s because those agencies are completely captured by the industry and intimidated by Congress, which in turn is a wholly-owned subsidiary of the banks themselves, as confirmed by Senator Durbin years ago in an imprudently frank moment three years ago.
And the threat issued by the DFS head Benjamin Lawsky is enough to focus the mind of any bank exec: to revoke the bank’s license to operate in New York State, which would be The End. The bank’s stock promptly cratered, and subtly phrased howls of outrage immediately began to issue from the pages of the Wall Street Journal and the New York Times, wherein banks are not to be expected to hew to any silly laws or things in their pursuit of lovely piles of cash.
But the complaint shows that Lawsky has the goods on this bank, not in a narrow, legal sense as the pro-bank propaganda machine is now spinning it, but in their internal e-mails displaying explicit attempts to hide the illegal activities. These included stripping the Iranian parties out of wire transfer cables so that the final beneficiaries remained invisible. Deloitte & Touche, their TBTF auditors, also played along.
In an honest financial system (especially one in which corporations are people), those responsible for these actions would be looking at lengthy prison terms rather than a slap on the wrist, a miniscule fine and a couple of weeks of head-hanging and phony repentance. Lawsky would never be able to resist the vast pressure from Obama on down to back off from his regulatory function and let the big boys get away with it.
But given that it involves helping Iran avoid economic pain (and not merely ripping off poor people), the bankster mob has a problem with this one. Even Wall Street-friendly pols like Schumer may not be willing to go to the wall for crooks who undermine Israeli foreign policy goals. And presidentially ambitious governor Andrew Cuomo, who in theory could undermine his appointee Lawsky, gains nothing by looking like yet another Blue Dog Democrat indistiguishable from the country club Republicans. (First you legalize gay marriage and get elected as a progressive surrounded by hordes of adoring youth and only then you emerge as the next defender of the 1%.)
Whether or not this turns into a real defeat for our financial overlords, it is a good indicator of where the battles will be drawn, i.e. not between the 1-percenter bosses and the rest of us, but among sectors of the 1 percent whose interests diverge. Will illicit money-scouring trump zionism this time around, or has SCB gone too far? Stay tuned.
Posted by Tim Frasca at 09:47