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Wednesday, September 5, 2012

The Banking Flap

by Sam Huntington

Banking and Finance is awfully difficult to understand for most people, and that complexity probably explains why no one understands banking and finance. In fact, I have often wondered if they didn’t purposely make it complicated because that way, it is easier to pull the wool over our eyes.

Still, there is a flap going on between the United States and foreign banks. The issue is whether some banks are ignoring US sanctions against Iran. One of these banks is British owned Standard Charter. The flap began when the New York State Department of Financial Services (NYDFS) threatened to cancel its state banking license. Why? Because according to the State of New York, Standard Charter has “gone rogue,” and has decided to ignore US sanctions on Iran.


According to NYDFS, Standard Charter has attempted to conceal more than $250 billion in transactions with Iran —the allegation causing Standard Charter to lose a quarter of its market value in the subsequent 24-hour period. But Standard Charter is fighting back. They say that no more than $14 million of transactions are questionable under US sanctions rules.

And Standard Charter’s Chief Financial Officer isn’t too happy with New York or the Americans, particularly after British and US banking regulators worked so closely together during the Barclay’s investigation. There are three issues here.

The first issue is that NYDFS made its accusations while an inquiry is underway; it is inconceivable to some that any one should make accusations until the investigation is final.

The second issue is that no one likes bullies, particularly when that bully is the United States. One might recall that Barack Obama previously apologized to the European Union for America’s arrogance. In response to this perceived episode of bullying, Standard Charter’s Group Finance Director is said to have displayed utter contempt for US banking regulators when he said, “You effing Americans! Who are you to tell us, the rest of the world, that we’re not going to deal with the Iranians?”

Now, however, there appears some doubt whether Richard Meddings actually made such a statement, as Standard Charter has pointed out that no such statement appears in any documents. Note: This is why I admire the British. They know better than to reduce anything to writing. We Americans have never learned this lesson.

The third, and perhaps the most important issue, is the underlying politics. “Are we starting to see an anti-London bias in US regulatory activities,” asked one executive. “Oh yes. Is there any subtle form of banking sector protectionism going on? Yes.”

If there is protectionism going on, it may or may not relate to Obama’s hatred of all things British, especially owing to the fact that his father was part of the Mau Mau uprising in Kenya following World War II (1952-1960).

Not everyone agrees the Americans are up to no good. Bank of England Governor Mervyn King has said he does not share the view that the US intends to undermine London as a financial center —but a member of parliament disagrees. “It’s a concerted effort that’s been organized from the top of the US government. This is Washington trying to win a commercial battle to have trading from London shifted to New York,” said John Mann of the parliament’s finance committee.

Well, so there you have it. Yet another example of what a great job Barack Obama is doing as a world leader. It is completely lost on Barack Obama that the United Kingdom has been a staunch ally of the United States longer than any other nation (with the possible exception of France), and yet he has undertaken measures to irritate the very people we may need to stand with us in the future.

I suspect these British executive chaps are now beginning to re-think their support of that nice, well-spoken black man who had never done anything worthwhile in his life until elected president of what used to be the greatest nation on earth.

12 comments:

  1. You’re right. This topic puts most people to sleep. That makes it a perfect environment for corruption, and if there is anything astonishing about the Obama administration, it is the depth of his corruption.

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  2. Interesting. It's hard to say what if any role Obama has had in this hufuffle; but I find this comment by Charter disturbing:

    !They say that no more than $14 million of transactions are questionable under US sanctions rules."

    Isn't that a bit like saying they are only a little bit pregnant?

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  3. The US is also harassing foreign banks to the point where an American can't open an account in many countries because of the onerous reporting requirements the US government has imposed.

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  4. In terms of global banking, $14 million is a drop in the bucket. Probably pocket change when compared to the amount of interest earned globally in a single day. At the same time, we could also say that the $14 million figure is almost like suggesting Alice is a little pregnant. I agree with CF that circumventing UN sanctions, even a little bit, is disturbing … but I also think nations must be free to make their own decisions, and then of course, live with the consequences of those decisions. There is nothing “FREE WILL” about the UN Charter.

    As for Obama’s role … I’m certain he doesn’t know anything about these details; I don’t think he controls NY State Banking. He may not even have known that there is a NYDFS. At the same time, Obama has created an environment here in America that is rife with corruption. How much Iranian money went into the campaign chest to elect Barack Obama in 2008? Does Obama dare criticize British banks now for the same (or less) level of corruption?

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  5. Wasn't the "You effing Americans" quote from a Barclay's executive in relation to the LIBOR shenanigans?

    It's hard to tell. Since continuing deregulation starting with the Savings and Loan meltdown under St. Ronnie Raygun the banksters have been getting friskier and friskier.

    They are a world unto themselves, creating nothing but paper profit and sucking the world dry.
    And if you think Obummer the Cabana Boy is bad, elect Romney.

    Train in the tunnel.

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  6. @ Ducky

    I agree there must be some regulation, particularly on issues affecting interstate commerce —but I do not agree the federal government should have sweeping regulatory authority. We must regulate government interference for the same reasons we use for regulating business; the whole “If men were but angels” argument. It is convenient for people like yourself to ignore the fact that we still have sovereign states, whose power the federal government may not usurp —and which have regulatory authority.

    I also do not agree with your proposition that government regulate everything and everyone. For some odd reason, you have an abiding faith in politicians and government bureaucrats. I suspect you get this from your master and mistress of the dark, Karl Marx and Frances Fox Piven. By the way, associated with the Lincoln Savings and Loan collapse were the so-called Keating Five, all of whom were democrats —including John McCain who is a republican in the same way you love America.

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  7. I also do not agree with your proposition that government regulate everything and everyone.

    ----
    Never hear that from me.
    I limit the regulation to matters which would cause extreme harm to people or the commons.

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  8. ...as an example Sam. I would regulate lunches purchased in school cafeterias and require nutrition standards. I would ban soda machines and junk food in schools.

    Children need to learn proper nutrition.

    I would not pull a Bloomberg and regulate fast food served to adults.

    At some point you're on your own.

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  9. Regulating school lunches for nutrition is not the role of the federal government.

    I have to wonder about the consistency of your concerns. On the one hand, you favor killing unborn children at the whim of mothers, but favor protecting little children from the affects of soft drinks.

    Hello?

    If anyone should be concerned about the nutritional value of foods served in school, it is state, county, or local government.

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  10. Never said Federal government. Local school board would do just fine except that the school lunch program is a Federal program.

    Oh and before you come back with something about social programs, read Lindblom and learn that providing lunch for poor kids was not part of the original goals of the program.

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  11. Trying to leverage the heads of other governments into doing our will is, and always has been, the wrong approach. If we have a conflict with a nation like Iran, we should either take that conflict directly to that nation or shut the hell up. We sure had no problem attacking Iraq when they weren't bothering us any, yet we can't do the same with Iran? All we can do is threaten our allies with economic distress if they don't knuckle under?

    Talk about your cowardly approaches to problem solving.....

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