When Hank Paulson left his gilded position as chief executive of Goldman Sachs in 2006 to answer the persistent call of public service, his first act in Washington as Treasury Secretary was to try to reform America's fragmented and frustrating system of financial regulation.
There is no mystery as to why this was his priority. You couldn't find a banker anywhere who thought the US had a regulatory structure befitting a modern nation, let alone a financial superpower, and finally a Wall Street man was going to get a chance to sweep away the maddening patchwork of overlapping and competing agencies and build instead a simpler, more efficient system. How naive the ambition seems now.
Four years and five months after Mr Paulson unveiled his bold proposals, and four years, four months and 30 days after they died under criticism from every entrenched interest in every existing regulator, financial firms operating in the US have to deal with just as many regulatory and enforcement agencies. These include some brand new ones whose actions are as unpredictable and dangerous as drunks wielding firearms. Just ask Peter Sands of Standard Chartered. The structure of US regulation has been raised anew by the debacle over Standard Chartered's infractions of US sanctions on Iran, over which the bank had been in settlement talks with at least four separate regulators and criminal investigators. One of them, the New York state department of financial services, suddenly broke from the pack and threatened to withdraw the bank's licence in order to extract a higher-than-anticipated monetary penalty. Sir Mervyn King, mild-mannered governor of the Bank of England, was moved to say "all that the UK authorities would ask is that the various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements".
Sir Mervyn was only echoing Mr Paulson, who launched his blueprint for reform with a complaint about a "balkanised" system that splits regulation of securities (by the Securities and Exchange Commission, led by Mary Schapiro) from regulation of derivatives (by Gary Gensler's Commodity Futures Trading Commission) despite the interconnectedness of these products. It also pits federal versus local regulatory agencies, where "in some cases there is a cooperative arrangement between federal and state officials, while in other cases tensions remain as to the level of state authority".
Both men's comments are echoed by executives of the regulated banks. Jamie Dimon, boss at JPMorgan Chase, as long ago as 2009 was opining in a newspaper editorial: "We should avoid the temptation to have multiple regulators just for the sake of having them. Three or four different regulators all looking at (and fighting over) the same issue is not a wise use of taxpayer money. Companies can't operate that way. Neither should the government." But this is the US, a federalised country.
Each of the 50 states have regulatory powers over some financial institutions in their jurisdiction, notably insurance firms and foreign banks, which is the remit of the DFS in New York for example. They also have state prosecutors with powers to take action against malfeasance. When US banks confessed to widespread foreclosure paperwork infractions last year, the settlement had to be negotiated with all 50 states' attorneys-general; New York's attorney-general Eric Schneiderman made a national name for himself by holding out for a tougher settlement.
Herein lies the problem, according to bank executives. A patchwork of agencies is not doomed to fail, though it is likely to. There are plenty of examples of successful cooperation, such as between the CFTC and the US attorney-general Eric Holder's justice department's criminal investigations team, in concert with the UK's Financial Services Authority, over the Libor-rigging scandal at Barclays. But the clincher for making the US system so hard to navigate is that many of the individual actors are incentivised not to co-operate but to be obstructive, or to appear "tough". The tougher you are, the bigger the fines you extract and the more powerful your agency can get. and you might just get tapped for higher office.
Benjamin Lawsky of the New York DFS won positive headlines by his assault on Standard Chartered, and he won $340m (£217m) that he can spend to beef up his agency for its next set of enforcement actions; he is now in a prime political position should he want to translate his fame into public office, in the way that his mentor Andrew Cuomo parlayed his activist stint as state attorney-general into a successful run for Governor.
When Mr Dimon penned his editorial, he was concerned with trying to prevent the creation of another agency, the Consumer Financial Protection Bureau, which would add another layer of rules on which financial products could be sold to the public and how, following the mis-selling of subprime mortgages and usurious credit cards. The Federal Reserve already has similar powers, though it had failed to exercise them, an oversight many blame for the subprime crisis. Wall Street failed to stop the creation of the CFPB, whose director Richard Cordray earned his spurs as attorney-general of Ohio.
When the Obama administration picked up the reform baton from Mr Paulson, new Treasury secretary Tim Geithner proposed his own simplification, with the merger of numerous agencies under a powerful new regulator. That plan, too, died in a day. The SEC and CFTC remain separate, the former based in Washington, the latter in Chicago, where it has many local political patrons; the new systemic regulator in the end had to be a "council of regulators" that critics worry will be little more than a talking shop.
The Standard Chartered debacle has highlighted again the balkanised, conflict-riddled system of regulation in the US. But if anything, it only encourages the next generation of Benjamin Lawskys. What it doesn't do is suggest any easy path to reform.