Regulators Take Populist Issue, Create an International Incident
It takes a special talent to take a crowd-pleasing issue like an investigation of high-level financial shenanigans which should be a political sure-fire winner, and promptly turn it into a cause for international friction replete with allegations of cronyism. But that's what bureaucrats in New York and D.C. have done in the wake of the Standard Charter could-be scandal over whether the British bank did deals with Iran in violation of U.S. rules. The Brits accuse American officials of wielding regulations and investigative powers as weapons to damage U.K. financial institutions with an eye to boosting the prospects of U.S.-based competitors. And you have to wonder if, somewhere in there, the Brits are quietly wondering why they should give a shit about D.C.'s neurotic obsession with one lunatic-ruled dump among many in the Middle East.
The mess started when Benjamin Lawsky of New York's newly created home for busybodies, the Department of Financial Services, decided to demonstrate that he could play with the big boys, by going batshit over Standard Charter. Without consulting with anybody else, he raised the Iranian money-laundering allegations and threatened to strip the bank of its license to operate in New York.
The Brits promptly fired back. Reports Bloomberg:
London Mayor Boris Johnson accused U.S. regulators of acting in a "high-handed" way over Standard Chartered Plc (STAN) and said criticism of British banks stems from jealousy of London as a financial center.
The U.S. "is still the land of the free and the home of the brave and, every now and then, just a tiny bit high-handed in her treatment of other nations," Johnson wrote in a column for the London-based Spectator magazine due to be published tomorrow.
Usually, as you rise up the political food chain, reactions become more muted. When they don't … Well, as the London Daily Telegraph has it:
George Osborne has intervened in the escalating row over Standard Chartered with three calls to the US Treasury Secretary in which he demanded "fair treatment of British businesses" by US regulators.
The Chancellor told Tim Geitner he would not impede any investigation but that he had been "very concerned about the way" in which New York's Benjamin Lawsky had sprung his explosive order on Monday.
The staid, old BBC takes a more holistic approach, pondering whether Yanks have any business bossing other folks around:
Does the US have a legitimate right to intervene in the behaviour of companies and individuals, or indeed of countries, operating beyond its own borders?
The question is pertinent and timely, given that Standard Chartered, a UK bank, was accused this week of violating US law.
You get the impression that, if the U.K. could still transport its own troops, they'd be marching into Albany right now. There's a reason why Forbes titles a story about this, "How Not To Go After A Big Bank: The Standard Chartered Debacle."
The Forbes story still ends with the standard disclaimer about how, "Of course, if Standard Chartered engaged in illegal behavior (it denies the extent of the NYDFS's claims) then none of that should matter …" But the illegal behavior is doing business with a country that the U.S. government considers very naughty — even naughtier than itself and its friends. Frankly, it's hard to get excited over that. And people outside our borders very much don't care about American officials' obsessions.
It's easy to see why the Brits might consider over-the-top huffing and puffing about an arbitrary rule to be nothing more than political posturing for advantage.