Benjamin Lawsky
New York State Department of Financial Services

City & State: Some areas you oversee have been policed in the past by the state attorney general. Is there overlap between the work of state Attorney General Eric Schneiderman and your agency? 

Benjamin Lawsky: Someone said to me the other day, “You know, when DFS was first created, I remember reading articles about how you were going to have all this conflict with Attorney General Schneiderman, and you said at the time you wouldn’t,” and they said to me, “You turned out to be right. I haven’t read about any conflict you have had with them.” That’s very true, I’m happy to say. I personally have a very good relationship with the attorney general. Our offices work together all the time, because frankly, unfortunately we get sued a lot because we take a lot of actions, and when we get sued, they represent us, so that has to be a very important relationship. A lot of people who work here, including myself, used to work in the attorney general’s office, so we have a very good sense of what’s in the heart of the A.G.’s jurisdiction, and frankly we try to stay away from that—not only because it’s conflict but it’s inefficient. They have a lot of resources, we have a lot of resources, both of us have limited resources, and for both offices to be working on the exact same issue doesn’t seem to make a lot of sense. I’m really happy as I look back on the last four years to see that whenever it looked like we might get involved in an issue the attorney general was already doing, in almost every case we went and did something else. I’m guessing it’s the same thing for them. We just haven’t had that kind of overlap. In terms of overlap, the biggest place is in the mortgage finance area. Schneiderman has been a real leader and very active in that area and we have a unit that does that as well. We tend to spend more time on licensing issues and becoming more efficient there, and we’ve spent a lot of time on non-bank mortgage servicers, companies like Ocwen, Nationstar, Walter. Typically Schneiderman has been involved with some of the more national banks, like JPMorgan Chase and others who we don’t directly regulate because they’re national banks. Even there, there hasn’t been much conflict.

C&S: It’s been four years since the state merged two separate agencies—on banking and insurance—to create DFS. How has that worked?

BL: The biggest challenges have been that we had two of everything. We had to HR departments and two IT departments and two general counsel’s offices and as we merged we called it our Noah’s Ark project because we had two of everything. We had to merge each of those areas. We didn’t go around firing people, but we have a healthy amount of attrition like most of government does, and given the level of attrition we strategically back-filled or didn’t back-fill in ways that allowed us to bring our budget down, 10 percent the first year and 10 percent the second year. We were able to recognize quite a few efficiencies, and at the same time the merger allowed us to do even more interesting work. The biggest challenge was there were two different cultures at those two different agencies. Insurance was a very forward-leaning agency and the banking department was less so. It’s not to criticize either one of them, it was just that insurance regulation is largely done at the state level—there aren’t really federal regulators for insurance. In the banking sphere, there’s a significant amount of federal regulation, and so over time that smaller banking department was less forward-leaning. We’ve now inculcated a single culture into the entire department. I’d say it’s more the forward-leaning model the insurance department had but the biggest challenge has been embedding that culture.

C&S: The state attorney general and the U.S. attorneys’ offices have considerable discretion in terms of deciding which cases to pursue. What is it like at your agency?

BL: We have some discretion in some areas and no discretion in other areas. How I describe it is we have five main verticals in the office: insurance, banking, capital markets, real estate finance and financial frauds. Within each of those units, there is very basic prudential regulatory work which we just have to do. We have to visit our banks periodically and send our examiners in to look at their books. We have to do that with our insurance companies. We have to do the licensing of the money transmitters or the mortgage brokers, and those are very basic things and the press doesn’t want to hear about it, it’s very boring—but it’s essential to being a good regulator. If you’re not making sure your banks and insurance companies are safe and sound and not going to collapse, you’re not really doing your job. That’s the ultimate protection for consumers and policyholders and depositors—to make sure the banks and insurance companies are going to be there tomorrow. That’s one level where we don’t have a lot of discretion. Then in each of those verticals there’s a second level where we have the ability to have our larger projects or initiatives. The key for me in running this place is to make sure we don’t overload any one vertical with too many of these big projects so they can’t do their daily prudential work of being a basic regulator. That’s a challenge of running this office, and something I have a dashboard on my desk and worry about each day. We want to be doing interesting projects and be worried about the next thing coming around the bend in financial regulation, or the new product that’s out there that could pose a risk or maybe it doesn’t, but we make sure to spread it out amongst the verticals.

C&S: There’s been speculation about what’s next for you professionally. Any comment on your short-term or long-term plans?

BL: I have no idea. I haven’t made any decisions about my future at this stage. I feel incredibly lucky that the governor asked me to do this job and I love coming to work each day, and I don’t know how many people can say they get up in the morning and they’re really excited every day about their job, and I really am. You don’t do these jobs forever. They have shelf lives, there’s no question. My 7-year-old daughter recently said to me, “Daddy, don’t you think you should let someone else have a turn at being superintendent?”—which I thought was kind of funny. Hidden in that is the point that these jobs don’t go on forever, but I haven’t made any decisions and I love this job and I’m going to continue to try to do it really well. I feel a responsibility to the governor as well as the state to really perform.