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.