Unanimous Confirmation: LAWSKY TO HEAD NEWLY CONSOLIDATED DEPARTMENT OF FINANCIAL SERVICES
By Sabrina Pry
Albany, N.Y.—Benjamin M. Lawsky has been confirmed Superintendent of the soon to be created New York State Department of Financial Services (DFS). DFS – a product of the merger of the State Banking and Insurance Departments – will begin operations on October 3, 2011.
“I am both deeply honored and humbled to be [chosen] by Governor Cuomo, to serve the people of New York as the Superintendent of Financial Services,” said Lawsky. “Just as a point of personal privilege, I want to thank my parents today. They taught me a lot growing up. One of the enduring lessons is to always take pride in your work, no matter your job. Whether working as a towel boy, waiter, a funnel cake guy, a copy boy, a coach, a prosecutor or Chief of Staff to the Governor – and I have had all those jobs – they taught me to always do my job, carefully, seriously and with pride because every job is important to someone and how someone performs their work says an enormous amount about that person’s character.”
Lawsky’s parents, wife, and children all attended his confirmation by the State Senate. During his confirmation, he sat beside his wife. Lawsky’s young curly-haired son sat on his lap, while his equally curly-haired daughter occasionally sat leaning forward, resting her elbows on the balcony ledge of the Senate Chamber, with no visible fear of heights. “We play basketball together,” answered Lawsky when asked about family activities, “And I like playing soccer,” his daughter chimed in.
Lawsky intends to hone in on his parent’s advice to always take pride in his work while reconfiguring New York’s financial sector, particularly hoping to evoke pride from the state’s business and consumer population. He plans to make DFS “a lean, efficient and effective financial services agency and hopefully, the best in the nation.”
Senator Liz Krueger (D/WF – New York City) addressed Lawsky about his opportunity to improve New York’s financial sector during his confirmation by the Senate Standing Committee on Finance. “This fact is that the federal government has not done a good job regulating and protecting consumers when it comes to banking and insurance, and the merger of the agency gives you, I think, far more tools to play that role here for us at the state level,” said Krueger, “So, I told some people in Finance this morning, ‘It’s nothing personal; I don’t trust any of you,’ and I think that it is important as a State to have a strong agency who will try to maximize the best opportunities for financial and insurance businesses in the State of New York, but always keep consumer concerns at the top of their list, and I am confident that you will be doing that as our first Superintendent of Financial Services.”
Lawsky’s confirmation is made in the wake of New York State Attorney General Eric Schneiderman’s announced plans to investigate and potentially prosecute any wrongdoing involving government spending, including member items, contracts, and pension fraud. Attorney General Schneiderman will be working in cooperation with Comptroller Thomas DiNapoli.
Lawsky is currently the Governor Andrew M. Cuomo’s Chief of Staff. He previously served as the Deputy Counselor and Special Assistant throughout the administration of then-Attorney General Cuomo. Prior to serving the Governor, Lawsky spent more than five years as an Assistant United States Attorney in the Southern District of New York, where he prosecuted securities fraud, organized crime, and terrorism cases. Previous to that, Lawsky served as Chief Counsel to Senator Charles Schumer on the Senate Judiciary Committee and as a Trial Attorney in the Civil Division of the Department of Justice. He received his law degree from Columbia University. “There is no one better suited to take on the task of leading this new department than Ben Lawsky,” Governor Cuomo said. “Ben’s deep understanding of complex markets, evolving financial products, and consumer protection uniquely enables him to safeguard investors while maintaining a vibrant marketplace in New York. Ben has been devoted to public service for his entire career and I am glad that he will continue to serve New Yorkers in this capacity. I’d like to thank Majority Leader Skelos and Senators DeFrancisco, Griffo, Farley, Smith, Seward and Breslin for their careful consideration during the confirmation process.”
Lawsky also received approval from the industry. Thomas E. Workman, President and CEO of the Life Insurance Council of New York, Inc. said, “I believe Governor Cuomo could not have made a better choice to lead this new consolidated department. Ben has the ability to understand quickly and thoroughly the complexities of the New York insurance laws and regulations, and their real world effect on both consumers and industry. In addition, he brings an evenhandedness with respect to enforcing the laws that is well suited for this important position. I congratulate Ben and the Governor, and look forward to working with them.”
Legislation enacting the merger of the New York State Banking Department with the New York State Department of Insurance was part of the 2011-12 budget agreement. The DFS is designed to better regulate modern financial services organizations. The New York State Banking Department was established by the New York Legislature in 1851, making it the nation’s oldest bank regulatory agency. Superintendent Richard H. Neiman stepped down from his position earlier this year. According to a speech he delivered to employees in April, Mr. Neiman plans to continue contributing to the merger process in an advisory role to the Governor’s efforts. Regina Stone is the senior Department official during the transition to the new agency. The Department is mainly responsible for state-licensed and state-chartered financial organizations, such as domestic banks, foreign agencies, branches and representative offices, savings institutions and trust companies, credit unions and other financial institutions operating in New York including mortgage bankers and brokers, check cashers, money transmitters, and licensed lenders, among others. The agency currently employs nearly 600 full-time employees. The New York State Insurance Department was implemented in 1860. The Department oversees insurers’ financial operations, provides fulfillment of insurer obligations, protect policyholders from financially impaired or insolvent insurers, eliminates fraud, other criminal abuse, and unethical conduct in the industry, and stimulates growth of the insurance industry in New York State. The agency currently employs 913 employees. James J. Wrynn is the current Superintendent and has been appointed to serve as Deputy Superintendent of Financial Services. Previously, he spent 25 years as a trial attorney focusing in the areas of life, accident and health insurance, property and casualty insurance, general liability insurance, insurance coverage disputes, professional malpractice, and product liability.
Lawsky may appoint other deputies as he deems necessary to fulfill the responsibilities of the department. The DFS organization will also include necessary departments and bureaus (including a state charter advisory board and a report bureau to examine ways to improve the efficiency and effectiveness).
Conversation on the merger began in January, during the Governor Cuomo’s State of the State address. “Many New Yorkers have lost their homes, jobs and life savings,” said Cuomo during his address, “To help protect our citizens in the future I will introduce legislation creating a new Department of Financial Regulation. The newly formed department will merge the Insurance Department, Banking Department and the Consumer Protection Board, and will be capable of regulating modern financial services organizations. A primary mission of this new agency will be to stand up for consumers, protect them against predatory lending and unlawful foreclosure practices, and provide access to good, honest and capable financial services at competitive rates.” It was later decided the Consumer Protection Board would be folded into the Department of State.
By combining the Banking and Insurance Departments into a unified financial regulator, the new Department of Financial Services aims to become a more efficient, modern, and comprehensive regulator of the financial sector.
According to Chapter 62 of the Laws of 2011, the Legislature acknowledged that the banking, insurance and financial services industries “constitute a critical sector of New York State’s economy.” In addition, the Legislature determined that responsive, effective, innovative, state banking and insurance regulation is necessary to operate in a global, evolving and competitive market place.
Under the legislation, DFS will contain separate divisions of Banking and Insurance, headed by separate deputy superintendents, with separate assessments and programs for appropriations, so as to maintain a regulatory firewall between separate entities, while still allowing for admin istrative efficiencies through back office and support consolidation. Governor Cuomo and the Legislature charged DFS with the goals of:
(1) Encouraging, promoting and assisting banking, insurance and other financial services institutions to effectively and productively locate, operate, employ, grow, remain, and expand in New York state;
(2) Establishing a modern system of regulation, rule making and adjudication that is responsive to the needs of the banking and insurance industries and to the needs of the state’s consumers and residents;
(3) Providing for the effective and efficient enforcement of the banking and insurance laws;
(4) Expanding the attractiveness and competitiveness of the state charter for banking institutions and to promote the conversion of banks to such status;
(5) Promoting and providing for the continued, effective state regulation of the insurance industry;
(6) Providing for the regulation of new financial services products;
(7) Promoting the prudent and continued availability of credit, insurance and financial products and services at affordable costs to New York citizens, businesses and consumers;
(8) Spuring economic development and job creation in New York;
(9) Ensuring the continued safety and soundness of New York’s banking, insurance and financial services industries, as well as the prudent conduct of the providers of financial products and services, through responsible regulation and supervision;
(10) Protecting the public interest and the interests of depositors, creditors, policyholders, underwriters, shareholders and stockholders;
(11) Promoting the reduction and elimination of fraud, criminal abuse and unethical conduct by, and with respect to, banking, insurance and other financial services institutions and their customers; and
(12) Educating and protecting users of banking, insurance, and financial services products and services through the provision of timely and understandable information. Lawsky said detailed plans are in order for the unification of the insurance and banking departments, including a new DFS website, but he does not yet know who will be on his transition team.
“We are taking many steps. We are doing everything we can now. We have the whole timeline worked out where we have goals that we want to get done during June, July, and August.” Lawsky explained. “The Governor hates to be on the second yard line. He talks about it all the time. He likes to get over the goal line. I share that sentiment.” Lawsky does not have his agenda planned as to how he will divide his time between New York City and Albany, “We are going to have to work that out,” he said. Understandably, in the midst of brainstorming plans to reform and bandage New York State’s financial industry, Lawsky likely has not had time to think about his various commutes, which elevators he will take where, or what coffee shops he stops at along the way.
The Governor and Legislature have provided Lawsky with guidelines for reaching the goal line, including taking whatever steps necessary to:
(1) Foster the growth of the financial industry in New York and spur state economic development through judicious regulation and vigilant supervision;
(2) Ensure the continued solvency, safety, soundness and prudent conduct of the providers of financial products and services;
(3) Ensure fair, timely and equitable fulfillment of the financial obligations of such providers;
(4) Protect users of financial products and services from financially impaired or insolvent providers of such services;
(5) Encourage high standards of honesty, transparency, fair business practices and public responsibility;
(6) Eliminate financial fraud, other criminal abuse and unethical conduct in the industry; and
(7) Educate and protect users of financial products and services and ensure that users are provided with timely and understandable information to make responsible decisions about financial products and services.
Lawsky interpreted the weight of his duties confidently, stating, “Several underlying principles will guide my work each day. First, promoting healthy banking and insurance industries and protecting consumers are not mutually exclusive. In fact, they can go hand in hand. Secondly, I will go to work reminding myself that banking, insurance, and financial services are not just about numbers and markets. These industries are about protecting real people who all too often have real problems in their everyday lives, whether it is health insurance coverage, or relief from a natural disaster, whether it is a family’s first home mortgage, or insuring that a senior citizen’s retirement account is safe. It is about New Yorkers first….I will take this job incredibly seriously and give my all to do it right. And lastly, I believe a partnership with the Legislature will be vital to the success of this new agency.”
Lawsky has no delusions about the difficulties lay ahead. “I see several main challenges for the department, at least at the outset. First, we need to modernize our regulations and stimulate the safe, sound growth of the banking, insurance, and financial services industries. This will mean more good jobs for New Yorkers all around the state. Second, the DFS, can become a more efficient regulator, doing more with less. Government needs to get leaner during these tough financial times. Third, we need to better protect consumers while also preventing systemic risks before those risks become a dangerous problem, and we need to do all of this in a way that does not stifle industry innovation. Obviously, there are numerous other challenges the new DFS will face, and some of the agency’s priority will change over time.”
Overall, Lawsky aims for productive and successful coexistence of business and consumers. “I think a better regulator, a smarter regulator, a more efficient regulator, a modern regulator is always going to be better for consumers; it is going to be better for the industry, too,” said Lawsky, “The new DFS will promote healthy and vibrant banking and insurance industries while also protecting consumers and our markets.”
