By TR EMERITUS

Recently, Kishore Mahbubani, the dean of Lee Kuan Yew School of Public Policy at the National University of Singapore, wrote an Opnion piece entitled ‘A Lawsky Unto Himself’ in the Financial Times alleging Benjamin Lawsky, the superintendent of the New York State Department of Financial Services was wrong to go after Standard Chartered for dealing with Iran: it is expressly forbidden in the U.S. for banking institutions to have anything to do with Iran.

Lawsky called Standard Chartered a “rogue institution” that hid Iran-linked transactions to the tune of US$250 billion from regulators and broke U.S. sanctions on Iran by involving itself in Iranian money laundering. Standard Chartered settled at US$340 million to avoid further public opprobrium but mainly because the preponderance of evidence is not in its favour.

Of and by itself banks breaking laws is not interesting: they do it all the time with chutzpah and impunity if not immunity.

What is interesting is the dean of Public Policy at NUS making public comments before the case is adjudged. This is tantamount to stirring public emotion to influence the judge/s. In Singapore it is a criminal offence to do so and he should have known better coming from an institution that wears the name of Lee Kuan Yew like a badge of honour.

What is interesting was how both sides attempted to brand each other ’rogue’: a word used to describe something or someone that is different from others in a dangerous or harmful way. Kishore Mahbubani claimed “Mr Lawsky has behaved as a rogue regulator” and his decision to expose StanChart is not based on merits but by domestic political considerations which by standing up to Iran his reputation has been enhanced.

If this whole episode were played out in Singapore, Kishore Mahbubani’s allegation could be deemed defamatory and he runs the risk of being made a bankrupt in a court of law with a 100% record of favoring the government and its supporting cast in one way or another.

He noted regulatory authorities are supposed to stand above politics but politics can protect rogue regulators. I wonder whether he was articulating a subliminal train of thought having lived in Singapore for such a long time.

What is interesting is his alcarity in casting aspersions on the U.S. overall regulatory system to deliver a fair and balanced judment on StanChart. I don’t remember a single instance of him ever raising questions concerning the same in the context of Singapore.

Another of Kishore Mahbubani’s peeves is his claim that since finance is not a domestic industry, what with billions of dollars crossing borders with a click of the mouse, the way to regulate it is through global norms and processes but Mr Lawsky is undermining this global cooperation among financial regulators. He didn’t elaborate what are these global norms and processes but he happily drew a picture of Basel and other international financial regulators in the same boat making huge strides towards cooperation on financial regulation. Last I know the global norms and processes in the financial industry is to screw the public for all that it is worth; remain as opaque as possible; privatise gains and socialise losses.

To his credit he acknowledged that “we are miles away from creating a global regulatory authority.” Notice the use of the pronoun ‘we’ that  gave the game away: he is an intimate and important part of the global  financial industry. Without spin doctors the growth of the financial industry will be seriously stymied not to mention it may be reorganised to provide real useful services instead of functioning as a legalised gambling den with even less oversight than a casino in Singapore.

What is interesting is Kishore Mahbubani’s rant against a government official actually doing his job and Kishore Mahbubani barking up the wrong tree. John E. Hemington, a U.S. attorney at law, observed that ”one can argue whether the US laws concerning dealings with Iran by banking institutions are reasonable or rational, but one cannot argue that they are not the laws.” He noted that Kishore Mahbubani believes global co-operation among regulators is the way to go but he raised an important question: “Until such ‘global co-operation’ is achieved, is it Prof Mahbubani’s position that regulators, operating within the framework of national systems of laws, should simply ignore those laws if they inconvenience those entities subject to the regulation – whether they be national or international in scope?”

John E. Hemington wrote a sublime reply why it is dangerous to adopt a laissez-faire hands-off approach to the banking and finance industry.

In reality it is already clear that, in the world of finance, “regulation” is largely an illusory fiction only rarely applied to restrain miscreants. One would suppose that this is what engendered the shock and surprise when a state regulatory officer actually stepped up to enforce an existing law.

It appears that these global financial powerhouses believe that they and their institutions should always be above the law in whatever jurisdiction they operate; and that their “indiscretions” should be overlooked for the sake of smooth and profitable operation.

If this is to be the case, it would seem to be better simply to eliminate the fraud and pretence of regulation and permit them to operate unconstrained, rather than force regulators into positions of legal and moral compromise.

For this to make any sense at all, though, financial institutions would have to be permitted to actually fail when they misuse, as they inevitably do, their unconstrained access to the world’s supply of capital. Even globally uniform laws are a meaningless charade if they are not enforced when broken.

The most interesting aspect of Kishore Mahbubani’s fulmination against the ‘rogue’ regulator must surely be his sublime portentous observations when the shoe is on the other foot. He railed against Lawsky for not considering whether some day there will be similar retaliation against American bank just because Amercian power appears to be unassailable.

He quoted Bill Clinton in a speech at Yale in 2003 that said as long as Americans believed they would always be No. 1, they should carry on acting unilaterally. But then added: “But if you believe that we should be trying to create a world with rules and partnerships and habits of behaviour that we would like to live in when we’re no longer the military, political, economic superpower in the world, then you wouldn’t do that.”

Kishore Mahbubani praised Bill Clinton for his courage in “whispering a truth that no other American politician would utter in public: America may become No. 2 in the world. And it may become No. 2 in the world sooner than expected. In purchasing power parity, China’s gross national product could become larger than the US’ by 2016.”

Kishore Mahbubani then asked: “How will America react when China begins to behave as unilaterally as Mr Lawsky?  …. Does the US want to encourage single standards or double standards in the global order?”

Admittedly the above is a long discourse. But there is an important point to it. That point is the dean of Lee Kuan Yew School of Public Policy at NUS is able to argue eloquently when it comes to protecting his own gravy train and the interest of the rich and wealthy. However, his bifurcated eloquence failed him miserably when it comes to his courage to whisper a truth no other Singapore politician or stakeholders in the PAP camp would utter in public: PAP may become No. 2 in Singapore. And it may become No. 2 in Singapore sooner than expected.

We don’t see the dean of Lee Kuan Yew School of Public Policy at NUS asking: “How will PAP react when the next ruling party begins to behave as unilaterally as themselves?  …. Does Singapore want to  encourage single standards or double standards in the local polity order?”

In truth it is this scary thought that is keeping me awake at night more than than all the screw ups by the incumbent.

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