New York’s Department of Financial Services (DFS) is the body that issues all-important licenses to banks wishing to operate in New York. It was created in 2011 by merging two different regulating bodies. And while it is usually the Fed, the FDIC, and federal prosecutors that regulate banks, DFS and its head, Benjamin Lawsky have gone on a crusade, collecting $5.3B in just three-and-a-half years. Overreaching into the areas traditionally regulated by other bodies. Lawsky is a former Chief of Staff for New York Governor Andrew Cuomo. He is almost certainly earning himself a reputation for going after the big banking bad guys to put himself in a good position to advance his political career with populist voters.
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Sources: Shock therapy
5 Comments
I think it is really interesting that a state regulatory agency is monitoring an area that I would usually associate as being under the purview of the federal government. $5.3 B is also a lot of money- I wonder where it is going.
Is Lawsky overreaching, or merely collecting money from institutions that have lobbied for loopholes you can drive a truck through, and are daring the Federal regulators to take action on when they drive a train through?
For $5.3 billion you can hire a lot of lawyers. If financial institutions are paying these fines, they must believe they have broken the rules — or else their execs and boards of directors are violating their fiduciary duties in a truly egregious manner, by paying unnecessary billions just to avoid hassle.
It is really interesting to think about New York State and how much power it might be able to exert over the whole financial system. Of course, it might be much easier for lobbyists to push back at the state level as well.
Financial regulation has always a hot topic for debate in the United States. I do find it interesting that he has outstepped his typical area of jurisdiction. What specific actions has he taken to do so? It seems the old rivalry between large financial institutions and regulators is still alive today.
I should add that the bank where I worked, which had a federal charter, was inspected by a team of both state and federal bank regulators. They divided up the labor as they had different responsibilities under the then-prevailing regulatory system.
But what exactly are the violations sufficiently blatant that banks quickly cough up billions? … more details would be welcome.
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