NY Bank Regulators Acting Like Thugs!

Yesterday the Wall Street Journal had an article about the state of New York’s Bank regulator, raising the question of whether or not they were being overly aggressive. The facts are that a United Kingdom bank, Standard Charter Bank, several years ago came under strong scrutiny from New York’s Bank regulator, to respond to this they hired the financial consulting firm Promontory Financial Group to help defend against any finding of wrongdoing by this state regulator! Promontory drew up reports on relevant issues and drafted correspondence to the state regulator on behalf of Standard Charter. As it turned out the NY regulator found wrongdoing on Standard Charter’s part and Standard Charter ended up paying around $1 billion dollars in multiple settlements with this regulator.



However, New York’s Bank Regulator found a big problem with Promontory’s behavior and most crucially want to block them from doing any future financial consulting work with banks regulated by this New York regulator besides fining them for wrongdoing. Specifically, the New York Bank Regulator’s problem with Prothontory’s behavior on the Standard Charter Bank matter was that Prothontary was not “candid”, they put things in the best light of Standard Charter and they did not hold the regulator’s perspective in their correspondence and dealing with the state regulator, There has been no allegation of fraud by Prothontory toward the regulator.



The State of New York’s Bank Regulator’s position here is unreasonable, unfair and preposterous! Prothontory was hired by Standard Charter to protect its interests against the state regulator and Standard Charter was paying Prothontory’s bill. For these reasons Prothontory duty of loyalty was to Standard Charter not to the state regulator their duty was to be an advocate on Standard Charter’s behalf. Prothontory was not hired like a financial institution would hire an accounting firm to do an independent audit of the institution there was no duty on Prothontory’s behalf to be independent just the opposite their duty was to be an advocate just like if Standard Charter hired a law firm to help the bank with this New York Bank Regulator scrutiny!



The New York Bank regulator seems to be developing a track record to try to prevent financial consulting firms from fulfilling their obligations to the financial institutions that hire them to be advocates on their behalf. The New York Bank Regulator seems to be under the impression they have the power to intimidate and pressure these consulting firms to not obstruct them in their pursuit of their regulatory goals. The circumstances seems to call for the New York Bank Regulator management to receive a rude awakening. This could be achieved by a good Judge enjoining the NY Bank Regulator to stop these penalty pursuits and ordering the bank regulator to pay these consulting firms legal costs and threatening to hold the regulator managers in contempt and throw them in jail if they continue this abuse of power. Maybe what needs to take place is that the financial industry as a whole has to go to the governor of New York and the leadership of the New York legislature and say you folks need to pass some legislation that reins in the state’s bank regulator from this overzealous regulation that obstructs us from protecting ourselves or we are going to move our industry out of your state!

 

Yes the regulators need to be in bed with the banks....

Pardon me, but given how monumentally banks have been deregulated, turning them into casinos, I just cannot come down on regulators who do their vastly limited jobs, compared to how it once was. I am surprised the regulators were funded enough to regulate, frankly.

One of the major problems we have today is the deregulation not the regulation. We saw a sound banking system that while less profitable, served the needs of this nation much better than it has done since deregulation. Banks were regulated as a reaction to their behavior and putting the nation in peril from their greed. And our banks were safe from that time, under FDR until the neoliberals in the GOP and the Democratic Party, dismantled what made our banking system sound, if less profitable. Back in the 1970, being a banking and finance major, it was the common joke that once we got our degree, and went to work for a bank, it would take us 20 years before we could pay for our suits we were required to wear at work. LOL.. Then banks became casinos later on, and most casino owners and the management had no trouble buying their brooks brothers suits in short order. And many became millionaires, when the gambles worked out, and when they didn't? The entire western world economy collapsed.

I think many bankers belong in prison. Not the regulators.

 

I think the issue is that NY regulators believe Promontory was misrepresenting the situation to Standard Charter, leading them to believe that they could make the fines go away, when they should have known the situation was clearly not favorable to Standard Charter. In other words, Promontory was taking advantage of Standard Charter's inexperience and lack of knowledge dealing with NY regulators.

 

The banks should relocate to Charlotte or Atlanta.