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Since the New York State Department of Financial Services (NYDFS) filed a complaint against UK bank Standard Chartered, the Federal Reserve and the Treasury have been making a huge stink to the media about the one year-old NYDFS stepping out of line.The bank stands accused of illegally transferring hundreds of billions of dollars of Iranian money. Apparently, multiple agencies had been working on the case for years.
Now back to why they’re angry. According to CNBC’s Steve Leisman, the Feds are even saying that the head of the NYDFS, Benjamin Lawsky, hijacked the investigation and may have over-stated the case, which could lead to a lower fine for Standard Chartered.
They were also given little notice that the case was being filed.
It all sounds very complicated, so having never been a regulator ourselves, Business Insider reached out to Neil Barofsky, former Special Inspector General of TARP and author of called Bailout: An Insider Account of How Washington Abandoned Main Street While Rescuing Wall Street.
We figured he could explain why The Feds would be upset about someone from outside D.C. filing a case like this. Here’s what he said:
“If you want to understand exactly what’s going on here, reread the four or five pages in chapter 1 of my book about my battles with Washington over the FARC case. Exactly the same thing happening here. They’d rather trash a potentially legitimate case than admit that they were asleep at the switch, especially now after the recent revelations about their failures with LIBOR and HSBC.”
The incident Barofksy is referring to took place when he was a New York state regulator as well. He was going against Colombia’s dangerous FARC terrorist organisation without much help from Federal authorities. When they got wind of that, they were less than thrilled.
Barofsky went on to say that he knows Lawksy well from his time in New York, and that even though Lawsky has never faced opposition like this before, he will stay strong in the face of this pressure from Washington.