Benjamin Lawsky: The Man Who Picked a Fight With Wall Street

Meet the state’s top banking regulator

That morning, Lawsky spoke to a crowd of financial journalists and industry types in a place so lush, white, and hushed, it feels like being inside a roll of expensive toilet paper. When Lawsky told the crowd that Massachusetts Senator Elizabeth Warren, Wall Street–basher-in-chief, was "brilliant" and "someone worth listening to," the silence was profound.

Afterward, Lawsky briefly spent time taking reporters' questions and pressing the flesh. In person, the 43-year-old civil servant is almost comically clean-cut, the type of man you imagine stepping out of the shower completely dry, clad in a suit and polished wingtips. He doesn't deny he has been hard to reach the past few months.

"I'm shy," he says, chortling dryly at his own joke before quickly turning serious. "No. I think that—you know, I don't think DFS should be about a cult of personality. I don't want it to be about any one person."

Willie Davis
Willie Davis

He comes off distinctly unpolitician-like; he doesn't try to deflect conversation about hostilities between himself and federal regulators and doesn't seem to have a canned, sunny answer about it. These days, he says flatly, the relationship between DFS and the feds is "fine."

True, "We shook things up with Standard Chartered. We said, 'We think this should be done in a different way.' But I think since then things have settled down."

Tensions between regulators are to be expected, Lawsky says. "But in a healthy competition, everyone is sorta pushing each other to do more and be a better regulator. And that's much better than the alternative, which is unhealthy competition, where it's who can be the lightest-touch regulator. Then you have standards moving downward."

Art Wilmarth, a law professor at George Washington University and a student of federal-versus-state regulator strife, says there's a history of the feds resenting the more aggressive actions of states like New York. Lawsky may be smart to keep his head down, out of the line of fire.

"The best he can hope to do is embarrass his federal colleagues so they sort of have to fall into line," Wilmarth suggests. "Eliot Spitzer did that for two or three years in the early 2000s. And there's no question he paid a price. I think he picked up a lot of enemies on Wall Street."

If it's tough to pin down Lawsky for an interview, it's nearly impossible to get the financial industry to speak his name—at least not on the record.

Told that a background conversation would have to be paired with an on-the-record statement for this story, Deloitte spokesman Jonathan Gandal countered by agreeing only to "fact-check" the article and "consider" submitting a statement for publication. (Deloitte did not provide the latter.)

The Securities Industry and Financial Markets Association, one of Wall Street's largest trade groups, also declined to comment.

Following numerous requests over the course of several weeks, the New York Bankers Association relayed a one-paragraph statement calling Lawsky "diligent" and adding that he "maintains an open door policy, and always listens to our concerns." Several other banking associations and trade groups didn't reply to multiple interview requests.

"We don't discuss our regulators publicly and we're still under a consent order," says Julie Gibson, a spokeswoman for Standard Chartered. When pressed, she adds, "They've got all the cards. It's not a relationship of equals. If you make them mad, then, you know . . ."

She opts not to finish that thought.

As he stood in the Yale Club's overstuffed ballroom, Lawsky had to be aware of his new position: feared and loathed in some corners, respected in others, but very closely watched. He has the capacity now to make people nervous, as he clearly did during his speech when he mentioned that DFS was about to turn its attention to the state's pension funds.

"Our predecessor agency did somewhat limited reviews and published them rarely," he said. "We're going to change that and significantly step up the scrutiny."

The comment generated a flurry of news reports; one Capital New York reporter immediately tweeted that Lawsky's words were "a warning shot."

The same thing happened in early August, when DFS announced it would look into Bitcoin, the online currency that's basically unregulated in the offline world. When DFS homes in on a target these days, people listen.

But Lawsky also seems uncharacteristically nervous about coming across as "anti–Wall Street," taking pains during the Yale Club event to make it clear he's as pro-business as anybody.

"I think taking real, appropriate, and sometimes tough action is not anti-business. It's pro-business because it protects our system, keeps up consumer confidence and ultimately helps prevent another meltdown," he told the crowd.

Yet his agency is essentially fighting a guerrilla war: running out of the jungle, picking off the targets it can reach, then retreating. It's outmanned by a financial system—an entire economy—that's been bent and twisted to serve the needs of the insurance and finance industries, with enthusiastic help from politicians who rely on donations from those sectors and regulators seeking lucrative landing spots at these firms someday. From this angle, Lawsky's job starts to look like a morbidly depressing game of Whac-A-Mole.

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The US Attorney General, Eric Holder was one of Chiquita Brands International's corporate lawyers. He secured a $25 million settlement between the Justice Department and Chiquita in 2004, when Chiquita was exposed as hiring a terrorist group to protect their plantations in Colombia.

The ultra right wing paramilitary group, the AUC was and is on the US State Department's list of foreign terrorist organizations, and it killed tens of thousands of Colombians. It is one of the bloodiest groups in Latin America.

And yet Mr. Holder has defended Chiquita for using terrorists to protect their interests in Colombia. Is this not corruption?

How can we expect a man capable of defending such associations, to fight against other corporate wrongdoers?


Why is the word "corruption" not used when referring to the relationship between US public institutions, US public officials and US corporations?


"Lawsky wanted to know why he shouldn't pull Standard's license to operate in New York—a move that would cost the bank billions. The financial world erupted in chatter." 

Because then the New York State treasury wouldn't have received $340 million from Standard that it sorely needed. Also if DFS pulled the license, Standard could apply for a license for its New York office from the OCC and it might be granted. Alternatively, it could apply to Connecticut for a license as UBS did to avoid the New York State Banking Department. Also, it could serve its New York clients from a Connecticut location.

"True, Lawsky had only managed a fine. But the settlement also forced Standard to install a monitor for two years to watch out for money-laundering violations, and hire permanent monitors to audit "internal procedures." 

You don't report who chooses the monitor.

"Two days later, DFS lit up Bank of Tokyo-Mitsubishi UFJ for laundering money for Iran and Burma. The department accused the bank of conducting about $100 billion worth of illegal transactions, fining it $250 million." 

I believe this represents retroactive prosecution for something BOTM self-reported to OFAC in 2008.

"Afterward, Lawsky briefly spent time taking reporters' questions and pressing the flesh. In person, the 43-year-old civil servant is almost comically clean-cut, the type of man you imagine stepping out of the shower completely dry, clad in a suit and polished wingtips." 

Lawsky is a political appointee, serving at the pleasure of Governor Cuomo. I suspect that is the reason for the huge fines. Lawsky is Cuomo's man charged with obtaining desperately needed cash for the state treasury.

"Barofsky is still betting on Lawsky. He says the culture of Wall Street can be changed, but only with fines so large and punishments so strict that banks and insurers simply have no choice but to take them seriously." 

The large fines haven't prevented the scandals because they are charged to the wrong party. The bank is a legal fiction. Every illegal act purportedly by a bank, must really be an illegal act of a bank executive and/or other employee. The culture could be more effectively changed by fining the offending bank employees for every nickel they own down to their underwear. In 19th century England, a convict's property forfeited to the crown. Lawsky won't do this because he is not trying to change behavior, he is trying to raise cash for a deficit laden State.


«But the U.S. government believed Iran was laundering its money to finance its nuclear weapons program. » Fine - but the Iranian government denies it has a «nuclear weapons programme» and no one has been able to show credible evidence that the country, in fact, has one. Pity that the «Voice» is willing to lend itself as a propaganda organ for the US State Department and certain other still less savoury entities....



Great piece which serves to illustrate just how much we need a Ben Lawsky in the UK . As a victim of the banking crisis which lost me my home, my livelihood and my financial future, I have been blogging about my struggle to get my "mis-sold" HBOS mortgage investigated for almost five years. As yet I, and many more like me, have achieved little because the UK banks do not fear either the consequences of their actions or being taken to task because their punishments amount to nothing more than minor tax deductable costs on the very lucrative practice of widespread banking criminality. I wrote this in an effort to add my voice to those who champion change.


@mhenriday Great! Why is Iran not allowed to conduct transactions? Because the US has been trying to topple its government for decades.

This part of the article distracts the reader. Our problems are not that SCB does transactions with Iran. Our problems are illustrated after the article moves on from the Iran story, and addresses other issues. And that part is depressing. No jail, no convictions.

Unfortunately the only person allowed to express the view that Iran should be allowed to do it and that the US has no business interfering with Iran's affairs, is the corrupt CEO of SCB