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Business

NY financial watchdog Ben Lawsky leaving to start firm

By
Kevin Dugan
Published May 20, 2015, 2:03 p.m. ET

Wall Street can breathe a little easier.

Benjamin Lawsky, New York’s top financial watchdog who earned a reputation as tough on big banks, will step down as head of the state Department of Financial Services next month to start his own legal consulting firm.

Lawsky, 45, who was appointed by Gov. Andrew Cuomo four years ago as the first superintendent of the newly created agency, plans to advise companies on financial matters such as cybersecurity and digital currencies like bitcoin, a new sphere of regulation he helped spearhead in New York.

Rumors have swirled since December that he was headed to a white shoe law firm, with the expectation that he would land a job advising the same banks he was regulating.

By starting his own firm, Lawsky may sidestep criticism that he’s going through the “revolving door.” He will not work for companies regulated by the DFS, according to a person close to Lawsky, although that wouldn’t prevent him from working for some bank clients.

“I am deeply proud of the work our team has done building this new agency and helping strengthen oversight of the financial markets,” Lawsky said in a statement. “We have assembled a great team at NYDFS and I have full confidence that the critical work of this agency will continue seamlessly moving forward.”

Lawksy announced he would leave the agency the same day that half a dozen banks pleaded guilty to criminal charges and agreed to pay $6 billion in penalties for manipulating currency and interest rates. The DFS will get $485 million of the $2.4 billion fine levied against one of those banks, UK-based Barclays.

During his four years, Lawsky was the closest thing to a rock star in the button-down world of bank regulators.

“The public has lost a real hero,” said Dennis Kelleher, president and CEO of Better Markets, a consumer advocacy group. “Unlike too many other prosecutors, Ben Lawsky wasn’t impressed or intimidated by the rich, powerful and well-connected banks and bankers on Wall Street or their many hired guns. He enforced the law without fear or favor, from the suites to the streets.”

Last year, he pushed French giant BNP Paribas to suspend some of its dollar clearing operations as a condition of its $9 billion settlement over money-laundering allegations.

He also forced out Bill Erbey, the chairman of embattled mortgage servicer Ocwen Financial, after exposing rampant conflicts of interest and a backdated-letter scandal that hurt struggling homeowners.

He also stepped on a few toes in his aggressive pursuit of banks, in particular when he jumped ahead of other regulators in a major money-laundering case against UK firm Standard Chartered.

He is also credited with ringing the alarm bell on cybersecurity and establishing regulations for the first chartered bitcoin exchange in New York.

While he made a name for himself, Wall Street took a grimmer view of Lawsky.

High-level bankers would privately complain that Lawsky was asking for too much control over banks by installing monitors and trying to suspend dollar clearing — a crucial function for any international bank.