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

Meet the state’s top banking regulator

Lawsky refuses to see it that way, though he does cop to feeling a little sad on occasion.

"I'll tell ya, I was a little depressed reading the papers this morning," he says, drumming at the Yale Club's white tablecloth. The New York Times had just produced a riveting story about Goldman Sachs manipulating the price of aluminum, while electricity price-gouging allegations had been leveled at JPMorgan.

"It makes you wonder how much progress we're making," he muses.

Willie Davis
Willie Davis

That said, he has no desire for his office to wield the hammer of criminal prosecution. "I know what it is to have that power, that very heavy burden, to put people in jail," Lawsky says. "And if you make a mistake, it's a very big deal to get it wrong. As I said, I'm very aware of the powers that DFS has. They're extraordinary powers, and we try to wield them humbly and carefully. So I don't sit around and say I wish I had the power to put people in jail. That's other people. That's the job of the attorney general of the United States. We have a lot of criminal prosecutors who have a lot of power and a lot of resources and a lot of people."

Yet Attorney General Holder isn't using those powers, and it seems increasingly unlikely that he will. Last month, the big buzz in the financial world was over the impending arrests of two former JPMorgan traders who allegedly tried to hide $6 billion in lost trades. It's the closest thing America gets to real punishment on Wall Street: two guys, nowhere near the top of the bank hierarchy, who may or may not actually go to prison. (One of the traders, Javier Martin-Arajo, was finally arrested in Spain at the end of August; he's currently fighting extradition to the U.S. The other, Julien Grout, is in his native France, which historically has been reluctant to ship off its citizens to the U.S.; his lawyer told the press his client "has not yet decided" whether he'll return to face charges.)

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 banks didn't get this type of political and economic power overnight," he says. "They spent decades amassing it. You're not going to just snap your fingers and undo the status quo like that. It's a grind."

People like Lawsky and Elizabeth Warren, Barofsky says, "are making incremental success. That's good. I'm extraordinarily confident that we'll get past this era of bank dominance and universal banks. Hopefully it's before the next crisis. It's an unsustainable model, so one way or another it's going to go down. It's just a question of whether we'll be smart enough to do it before we repeat what we did in 2008, only perhaps on a larger scale. And the best way to avoid repeating it is with regulators like Ben Lawsky."

Lawsky is more modest. "We're trying to make reforms that make the system better. Are we gonna fix every problem out there? No; I'm not self-delusional enough to think that the world will become a great place. And, look, in every society there are good apples and bad apples. And I think sometimes the problems are just the result of bad apples, and we're always gonna have some bad apples."

Adds the lone-wolf regulator: "I'm hopeful." He says it with evident sincerity. "I'm a hopeful person."

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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