This Standard Chartered Bank story has become really intriguing, mainly because New York Department of Financial Services head Benjamin Lawsky committed the unpardonable sin of doing his job.

The story so far: this week, the DFS cited Standard Chartered with $250 billion in illegal money-laundered transactions with the government of Iran. It’s only the latest in a series of money laundering revelations at the world’s major financial institutions, something that can only be described as epidemic. These have been resolved by global financial regulators by either ignoring it or setting up some predetermined settlement. But Lawsky didn’t get the memo. He filed the complaint and set up a court date for next week with Standard Chartered, with the ultimate goal of taking away their ability to do business in the state. The bank didn’t like that at all. They mulled over a countersuit, which is kind of hilarious, because the charges would be groundless. What exactly was Standard Chartered to say, “we were working on a settlement until the DFS blew everything?”

It turns out that the regulatory community was relatively unhappy with Lawsky as well. They didn’t want to get shown up by a vigorous regulator exposing their conduct as inept and practically abetting the misconduct. So now the regulators have attempted to corral Lawsky into a committee:

U.S. authorities are forming a group with New York’s top financial regulator to negotiate a settlement with Standard Chartered over allegations it illegally hid financial dealings with Iran.

The U.S. Treasury Department, Federal Reserve, U.S. Department of Justice and Manhattan district attorney’s office are scrambling to reach an understanding with the New York State Department of Financial Services over the ground rules for negotiations with the U.K.’s fifth-largest bank by assets, according to people familiar with the talks.

To echo Yves Smith, let’s take a look at the context here. Standard Chartered broke the law. Lawsky did his job and sued them over it, citing New York state law and not federal law. The other regulators manifestly did not do their job. They went right from revelation into negotiation, seeking a settlement out of the box.

Lawsky has every right to threaten the charter of the bank. He discovered emails that show a clear conspiracy to hide the identity of their Iranian clients. This is well within Lawsky’s authority, to act to revoke a charter if the member bank is operating in an untrustworthy fashion.

Now Standard Chartered has let loose their country’s Finance Minister to jawbone our Treasury Secretary over the matter.

US Treasury secretary Tim Geithner has reassured George Osborne that US regulators investigating breaches of sanctions by Standard Chartered will try to coordinate their actions.

As the London-based bank prepares for a hearing with New York state’s department of finance services regulator, which has accused it of moving $250bn of Iranian money around the financial system, the chancellor has sought assurances that the bank will be treated fairly.

Osborne and his team spoke to Geithner and officials on Tuesday and received assurances that the US Treasury’s Office of Foreign Assets Control (OFAC) would work with the myriad of other regulators looking at Standard Chartered’s dealing with Iranian clients between 2001 and 2007.

Sir Meryvn King, the governor of the Bank of England, had already called publicly for the US regulators to work together after the surprise decision by the New York regulator to publish an order against Standard Chartered on Monday.

Lawsky has really messed with the forces of nature. The British and US regulators are simply not supposed to seek punitive actions against an upstanding member of the financial community. Now the top regulators on all sides are working frantically to put the genie back in the bottle. Lawsky must be under a tremendous amount of pressure. If you’re so inclined, you could contact Lawsky and offer a perspective from the other side of the story.