How meltdowns happen

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From a public relations point of view U.S. banking giant Wells Fargo caught a break this week with a legal case eclipsed by troubles at Standard Chartered.

British regulators are complaining that the New York Department of Financial Services, created in 2011, overstepped its boundaries by announcing a $340 million settlement with the bank on money laundering charges without giving other agencies enough of a warning that legal action was in the works.

The regulator said the British bank had been handling illegal Iranian banking transactions totaling about $250 billion over the course of a decade and hiding this from authorities.

This allowed a Wells Fargo settlement with the Securities and Exchange Commission to slip into the shadows. That case involved a fairly routine case of a bank overselling securities without warning buyers of the risks.

Ho-hum. The bank agreed to pay a fine of $6.5 million and for a bank that earned $16 billion in profit in 2011, this could hardly cost investors any sleep at all.

Far more uncommon, the case included a $25,000 fine for a former Wells Fargo broker named Shawn McMurtry, whose punishment also included suspending his right to work in the securities industry for six months.

It is not overstated to say that this is a stupendous step for a financial systems regulator to actually name a human being as a culprit in a case that at least symbolically says that real, flesh and blood bankers failed to take responsibility for the subprime mortgage mess that sent the economy into a tailspin.

The judgment falls short of saying Wells Fargo was playing with fire, knew about it and didn't care. The bank, instead, was accused of not researching the securities it was selling well enough, but relying instead, The New York Times reported, on the credit ratings the securities were given.

"Broker-dealers must do their homework before recommending complex investments to their customers," Elaine Greenberg, head of the SEC's Municipal Securities and Public Pensions Unit, said in a statement.

Failing to do their homework sounds very different than deliberately undermining the U.S. economy. The judgment says Wells Fargo should have done better, but didn't.

For years, bankers have said that they could not be held responsible for a meltdown that almost no one saw coming. That's a defense that says you can't blame just one sheep in a flock when everyone else is doing the same thing.

On the face of it, one would think that bankers relying on this argument would appreciate regulatory efforts more than they do, instead of fighting regulation at every turn.

In international markets Thursday, the Nikkei 225 index in Japan gained 1.88 percent, while the Shanghai composite index in China fell 0.32 percent. The Hang Seng index in Hong Kong dropped 0.45 percent, while the Sensex in India slid 0.4 percent.

The S&P/ASX 200 in Australia rose 1.14 percent.

In midday trading in Europe, the FTSE 100 index in Britain gave up 0.24 percent, while the DAX 30 in Germany added 0.11 percent. The CAC 40 in France slipped 0.12 percent, while the Stoxx Europe 600 was flat, off 0.01 percent.