The New York Superintendent of Financial Services dropped a bombshell today.... It threatens SCB with the loss of its New York banking license and termination of access to dollar clearing services. The latter alone is as huge deal. You are not a real international bank unless you have dollar clearing. Sumitomo Bank looked at giving up its US banking license in 1985 when it was examining deal structures for making an investment in Goldman, and ascertained that giving up access to Fedwire would cost it over $100 million a year and considerably weaken its position in Japan. SCB is certain to be a much more active dollar player than Sumitomo was and the volume of international transactions has grown hugely since then.

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The lack of action by everyone ex the lowly New York banking supervisor is mighty troubling. The evidence presented in Lawsky's filing is compelling; he clearly has not gone off half cocked. Why has he pressed forward and announced this on his own? The Treasury Department's Office of Terrorism and Financial Intelligence has supposedly been all over terrorist finance; the consultants to that effort typically have very high level security clearances and top level access (one colleague who worked on this effort in the Paulson Treasury could get the former ECB chief Trichet on the phone). For them not to have pursued it anywhere as aggressively as a vastly less well resourced state banking regulator, particularly when Iran is now the designated Foreign Enemy #1, does not pass the smell test.

Read Yves' article if you have the heart and stomach to see just how thoroughly the US DOJ and regulatory services have been corrupted and just how blatant were the actions by Standard Chartered, starting with the ORDER PURSUANT TO BANKING LAWORDER PURSUANT TO BANKING LAW § 39 (PDF) from the New York State Department of Financial Services. Now we can wait for someone in the financial services sector to leak information about the department head and some hooker that they set up for him, or some such equivalent attempt at delegitimization. No good deed goes unpunished.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."