Cuomo’s Big Bank Heist
Justice — or cash for an Albany habit?
IS the Cuomo administration’s rough justice for a British bank meant to fight global moneylaundering — or grab cash to plug New York’s bottomless budget hole?
Two weeks ago, New York levied explosive accusations against Standard Chartered, a bank whose history dates back to the Victorian era.
Benjamin Lawsky, Gov. Cuomo’s head of the state Department of Financial Services, an agency Cuomo and the Legislature created last year, got straight to the point: Standard Chartered was a “rogue institution” that had engaged in “egregious misconduct.”
For nearly a decade, Lawsky said, the bank had “schemed” with Iran’s government to move nearly $250 billion through its New York branch, leaving the “US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes” — all for millions in fees.
The bank even “successfully misled New York regulators” when they peeked under rocks.
A reasonable person would think there’s no going back from such words. Indeed, Lawsky summoned the bank’s executives to a hearing to explain why New York should allow them to do business here.
Standard Chartered professed to be shocked by the allegations. British officials and pundits complained that it was New York’s regulator that was the rogue, as it hadn’t bothered to work with other regulators.
What happened after that was strange. The bank abruptly said it would pay $340 million to New York to settle the complaint — and Lawsky’s office promptly called off the hearing.
This outcome makes no sense in light of the original charges.
If Standard Chartered endangered people by enabling terrorists and criminals, then it should lose its license — and Lawsky was correct not to wait for pussyfooting national regulators.
But a $340 million fine is nothing in such a context. As the British press has pointed out, it’s only 6 percent of Standard Chartered’s likely profits this year.
One way of thinking about the outcome, though, does make sense.
Five years into an economic slump, New York needs money to fund a budget still built for the boom years. The state faces a $982 million deficit next spring.
Though that’s less than 2 percent of General Fund spending, every dollar counts. That’s especially true since the last two years’ worth of budget cuts, pension reform and tax hikes on the wealthy have supposedly fixed our budget woes.
The governor doesn’t want to spend next spring fighting again with the state’s special interests.
Yet a good surprise from Wall Street bonuses (and their tax revenues) is unlikely to save him from this fate. As New York City reported last week, the five biggest financial firms’ investment houses saw earnings decline by 17 percent in the second quarter of the year compared to the previous spring — following a 26 percent decline in the first quarter.
But there’s more than one way to get money from the financial sector.
An extra third of a billion dollars from Standard Chartered gets New York more than a third of the way to plugging next year’s gap.
The budget gap the year after next is nearly $3.6 billion — but there are always other “bad” banks. Remember, New York City is using $150 million from a moneylaundering settlement with Dutch bank ING to help balance its own budget.
Here are two ways to tell whether New York’s government is protecting us from rogue banks — or just milking these targets, which don’t enjoy much public sympathy.
One is the language of Standard Chartered’s settlement, which isn’t yet final.
Britain’s Daily Mail reported last week that the bank is “desperately negotiating to avoid admitting significant guilt” — not only to save money in private lawsuits, but also to salvage its reputation.
If New York lets the bank save face in the final document after having come on so strong, Standard Chartered will have shown the world that this was little more than a shakedown.
The other way is to look at where the money goes.
If Standard Chartered’s actions helped enable terrorists, drug dealers and corrupt foreign governments, as the state originally charged, then the $340 million should go not toward New York’s general budget but to the families of the victims of these criminal enterprises.
New York shouldn’t balance its budget even in part by using a bank’s illgotten profits.