No small degree of turmoil was unleashed in the currency trading community yesterday when it became known that Benjamin Lawsky, superintendent of the New York State Department of Financial Services, requested documents from more than 12 banks pertaining to their currency trading practices. According to Bloomberg News, the banks include Goldman Sachs, Deutsche Bank, Credit Suisse, Citigroup, and others. It seems likely that one result of the investigation is that any currency traders who are left at the end of it will be reduced to communicating via carrier pigeon.
Deutsche Bank let go of four traders after conducting its own investigation, according to Bloomberg. Goldman is shedding two partners, and Citigroup announced that the head of its currency trading operations will soon leave. Lawsky’s effort is one of 12 regulatory investigations under way since reports emerged suggesting that currency traders around the world had colluded to manipulate the market.
The investigations are being led by a diverse group of agencies in the U.S., Asia, and Europe, but one thing they can come to a consensus on is that e-mails, instant messages, and chat-room communications form the bedrock of a growing amount of evidence of alleged wrongdoing. In response, Wall Street firms have been banning or restricting their traders’ use of chat rooms in particular, with Goldman Sachs, Citigroup, JPMorgan Chase, and Deutsche Bank announcing that they are revisiting the issue.
In his role as state superintendent of financial services, Lawsky oversees insurance companies, American and foreign banks doing business in New York, as well as mortgage brokers and most other financial-services companies. A graduate of Columbia Law School, Lawsky is a former chief of staff to New York Governor Andrew Cuomo and was also a prosecutor in the U.S. Attorney’s Office for the Southern District of New York, where he worked on white-collar crime, organized crime, and terrorism cases. It’s perhaps not surprising that he’s close friends with another ambitious government prosecutor focused on Wall Street: Preet Bharara, the current U.S. attorney for the Southern District.
If nothing else, Lawsky and Bharara may usher in a new era of in-person communications on Wall Street.