The show-cause order issued Aug. 6 by New York State Department of Financial Services' Benjamin Lawsky, threatening to revoke British Dope, Inc. bank Standard Chartered's U.S. banking license because of illegal activities which "left the U.S. financial system vulnerble to terrorists, weapons dealers, drug kingpins and corrupt regimes," has unleashed a firestorm of protests not only from Treasury Secretary Tim Geithner et al., but now also from Bank of England Governor Mervyn King and others in Great Britain. King yesterday stressed the supposed differences between the LIBOR affair and the allegations against Standard Chartered, noting that in the latter case only "one regulator, but not the others, has gone public while the investigation is still going on." He denied that any of this reflected an overall American attack on City of London banking, as some British MP's have charged.
The affair, however, undoubtedly intersects the factional brawl going on in Great Britain over LaRouche's Glass-Steagall policy and the related question of who will succeed King at the Bank of England when his term expires next June. The CEO of Standard Chartered, Peter Sands, had been one of the front- runners to replace King, but now he is pretty much out of the running. Previously, another contender, Bank of England Deputy Governor Paul Tucker was knocked out of the picture when his role in the LIBOR-rigging affair came to light. Both Sands and Tucker are considered to be hostile to Glass-Steagall.
An enraged Sands was quoted in a front-page article in today's Financial Times saying that "our reputation has been damaged. It's not worth pretending that isn't the case." The FT further reported that, "as UK politicians rally to StanChart's defense, the bank has sought legal advice about whether to pursue legal action against the US regulator, people familiar with the talks say." The Telegraph's Damian Reece likewise threatened that, as bad as "rogue traders" are, "rogue regulators" like Lawsky are equally bad, and that if it turns out that Lawsky is wrong, then he should be "held to account."
Lyndon LaRouche today commented that such a move by Standard Charter against Lawsky would be a tactical mistake. "They would be wiser to shut their mouths," he suggested.
Meanwhile, the Federal Reserve felt it necessary to request that Standard Chartered's New York office report in every few hours on its liquidity position, clearly fearing a bank run or something similar, Reuters reported.