Damn those activist judges! (Who are trying to compel the SEC to do their jobs)

/This deserves a Cool or Spiffy tag

/Hot like an angry Citigroup Lawyer

He's got a point, I guess. Either the SEC has to try these cases or it should stop extorting settlement money from the banks.

TFA: On Wednesday, the judge homed in on the issue of banks who settle with the S.E.C. and pledge to not violate the securities laws, yet repeatedly do so. Why then, Judge Rakoff asked, had the commission not brought any contempt charges against large financial firms in the past 10 years?

Mr. Martens, the S.E.C. lawyer, said that the agency felt that there were better and more appropriate ways to deal with chronic misconduct. The S.E.C. has said that striking settlements is often preferable to a costly and protracted lawsuit that it might lose.

Judge Rakoff called the contempt power - a judge's ability to punish a party for disobeying a court order - "the backbone of the judiciary." He questioned whether the S.E.C. was really serious about ever seeking an injunction against repeat offenders.

"It's just for show," Judge Rakoff said.

"We're not saying that we will never use injunctive relief," said the S.E.C. lawyer.

"Hope springs eternal," the judge replied.

Oh Snap

So, which will it be? A light plane crash, a random mugging, a tragic accident involving a tanker of liquified natural gas? Maybe one of the classics, drugs found in the judges car along with an underage prostitute (live or dead) in the trunk?

Debeo Summa Credo: He's got a point, I guess. Either the SEC has to try these cases or it should stop extorting settlement money from the banks.

Extorting?

When the jailkeep lets the homicidal maniac out of his cell for $5, setting him free to continue his rampage, I'd call that many things.

Extortion isn't one of them.

Stupid judge. He's using the wrong book! There are 2 sets of laws, and this clown is trying to apply normal people justice to the aristocracy. That's just never going to work.

Debeo Summa Credo: He's got a point, I guess. Either the SEC has to try these cases or it should stop extorting settlement money from the banks.

Extorting? I have to wonder about your mind. How much of the world around you do you shut out to be able to make a statement like that?

Debeo Summa Credo: He's got a point, I guess. Either the SEC has to try these cases or it should stop extorting settlement money from the banks.

EXTORTING?!

FTFA: The S.E.C.'s current enforcement action against Citigroup is at least the fifth time that the commission has reached a settlement with the bank related to civil fraud accusations.

No one goes to jail, no one admits doing anything wrong, and no one changes their business practices. The only losers are those of us who don't own lobbyists or congressman. The banks understand that occasionally paying relatively tiny fines is simply the cost of doing business, like a low-level criminal handing a fat envelope to Tony Soprano once in a while.

I dated an extortionist once. She could fold herself over while having sex, it was kind of neato.

MurphyMurphy: Debeo Summa Credo: He's got a point, I guess. Either the SEC has to try these cases or it should stop extorting settlement money from the banks.

Extorting?

When the jailkeep lets the homicidal maniac out of his cell for $5, setting him free to continue his rampage, I'd call that many things.

Extortion isn't one of them.

If the jailkeep tells you that he's going to arrest you for rape unless you give him $5, that's extortion.

The SEC and the banks are playing footsie with each other - SEC says I think you crossed the line here, how about you give us a few hundred million and we won't take it to a jury that will have no sympathies at all for you.

I think they should put up or shut up. Either prosecute the banks for these supposed heinous institutional crimes, or stop extorting money with threats of prosecution.

Man, ever since they accepted A&M and Missouri, the SEC just hasn't been the same.

Anyone else read that as Red Jerkoff?

Debeo Summa Credo: MurphyMurphy: Debeo Summa Credo: He's got a point, I guess. Either the SEC has to try these cases or it should stop extorting settlement money from the banks.

Extorting?

When the jailkeep lets the homicidal maniac out of his cell for $5, setting him free to continue his rampage, I'd call that many things.

Extortion isn't one of them.

If the jailkeep tells you that he's going to arrest you for rape unless you give him $5, that's extortion.

The SEC and the banks are playing footsie with each other - SEC says I think you crossed the line here, how about you give us a few hundred million and we won't take it to a jury that will have no sympathies at all for you.

I think they should put up or shut up. Either prosecute the banks for these supposed heinous institutional crimes, or stop extorting money with threats of prosecution.

Just to be clear, you think every settlement is extortion? So if you take a plea bargain is that extortion? Or you get hit by a drunk driver and settle with his insurance company, you are extorting his insurance company?

I like this judge. This will change nothing, but at least he's making the paper pushers sweat a little.

Moopy Mac: Debeo Summa Credo: MurphyMurphy: Debeo Summa Credo: He's got a point, I guess. Either the SEC has to try these cases or it should stop extorting settlement money from the banks.

Extorting?

When the jailkeep lets the homicidal maniac out of his cell for $5, setting him free to continue his rampage, I'd call that many things.

Extortion isn't one of them.

If the jailkeep tells you that he's going to arrest you for rape unless you give him $5, that's extortion.

The SEC and the banks are playing footsie with each other - SEC says I think you crossed the line here, how about you give us a few hundred million and we won't take it to a jury that will have no sympathies at all for you.

I think they should put up or shut up. Either prosecute the banks for these supposed heinous institutional crimes, or stop extorting money with threats of prosecution.

Just to be clear, you think every settlement is extortion? So if you take a plea bargain is that extortion? Or you get hit by a drunk driver and settle with his insurance company, you are extorting his insurance company?

It's not really extortion, it's more like the madam tipping the beat cop a payoff or a free night in order not to get busted. You could say the cop is extorting the madam, but it's just corruption, plain and simple.

Except with the SEC, it's all done completely in public and without any scrutiny (besides His Honor FTA). "Eh, we know they're doing something wrong, but we're just going to take our cut and not pay any attention to the man behind the curtain."

Fark Eric Holder. This guy should be the Attorney General.

Seriously, I'd rather the SEC take ALL of these bastards to court and lose a couple of the cases than to keep seeing these little fines being levied. Putting this all out there, having these execs and traders actually answering questions, in a public court of law is worth the extra taxpayer money.

Based on this little bit of info, I'd say we need more judges like this guy. These companies never seemed to get fined for more than what their transgressions profited them. The fines (as enormous as they sound to the average Joe) are small enough to be chalked up as the cost of doing business. I normally shy away from ascribing motives to others, but the SEC seems content to milk the offending companies for revenue, and fines that were actually effective might halt that gravy train.

phyrkrakr: It's not really extortion, it's more like the madam tipping the beat cop a payoff or a free night in order not to get busted. You could say the cop is extorting the madam, but it's just corruption, plain and simple.

Except with the SEC, it's all done completely in public and without any scrutiny (besides His Honor FTA). "Eh, we know they're doing something wrong, but we're just going to take our cut and not pay any attention to the man behind the curtain."

There's a difference. The cop on the beat is actually pocketing the money he takes from the madam. The settlement money received by the SEC goes to the SEC and the government, not the officials who agree to the settlements. So any claim of 'corruption' is a stretch.

Maybe my use of 'extortion' is too strong a word. In reality, the SEC is building these cases, which by no means are open and shut cases, despite what the financial novices believe. They go to banks and say they'll prosecute if a settlement isn't reached. And if these go to trial and the bank is convicted, much worse results will occur (like an Arthur Anderson-like collapse). So the bank settles, and the SEC walks away with its trophy. The SEC doesn't want to go to court and lose (like they did with the Bear Stearns (new window) guys), nor do they want to force a company out of business only to have the decision overturned on appeal like what happened with Anderson (new window).

mod3072: Stupid judge. He's using the wrong book! There are 2 sets of laws, and this clown is trying to apply normal people justice to the aristocracy. That's just never going to work.

In imperial China the laws only applied to the common man, the aristocracy was responsible to heaven. Seems like we are doing the same here with the rich and corporations.

Hoarseman: So, which will it be? A light plane crash, a random mugging, a tragic accident involving a tanker of liquified natural gas? Maybe one of the classics, drugs found in the judges car along with an underage prostitute (live or dead) in the trunk?

Worse, he'll be hired as defensive coordinator at Penn State

Commander Lysdexic: "We're not saying that we will never use injunctive relief," said the S.E.C. lawyer.

"Hope springs eternal," the judge replied.

I can understand the SEC's position that they think something wrong was done, but they doubt they will prevail in a trial. That's kind of the point though. When the SEC points the finger at a company they say did wrong, but then settles with them, the company gets to tell the whole world they did nothing wrong at all. And if the SEC can't win at trial because the laws simply don't work, then that is the strongest proof possible that we need NEW LAWS. The farce of the SEC settlement pattern is that they get to tell the public "see we caught them" without ever having to really test whether the laws on the books actually prohibit the bad behavior in question.

Debeo Summa Credo: There's a difference. The cop on the beat is actually pocketing the money he takes from the madam. The settlement money received by the SEC goes to the SEC and the government, not the officials who agree to the settlements. So any claim of 'corruption' is a stretch.

It has a much stronger tie to corruption that you believe. A lot of members of the financial industry cross back and forth to the SEC. The SEC lawyers are bringing suit against their future employers. (new window) It isn't in the lawyers' best interests to be too harsh against Wall Street, since those people will be paying their salaries in a few years.

cefm: I can understand the SEC's position that they think something wrong was done, but they doubt they will prevail in a trial. That's kind of the point though. When the SEC points the finger at a company they say did wrong, but then settles with them, the company gets to tell the whole world they did nothing wrong at all. And if the SEC can't win at trial because the laws simply don't work, then that is the strongest proof possible that we need NEW LAWS. The farce of the SEC settlement pattern is that they get to tell the public "see we caught them" without ever having to really test whether the laws on the books actually prohibit the bad behavior in question.

I agree with your sentiments largely, but if the SEC can't win at trial it might not be that the laws don't work, it could be that the laws weren't broken.

Grrr. Ate my link: le-to-crisis-cleanup/

Also at:

Fine! You can find it doing a google search (new window).

MisterBill: Fine! You can find it doing a google search (new window).

LOL. Strike three, you're out!

Debeo Summa Credo: cefm: I can understand the SEC's position that they think something wrong was done, but they doubt they will prevail in a trial. That's kind of the point though. When the SEC points the finger at a company they say did wrong, but then settles with them, the company gets to tell the whole world they did nothing wrong at all. And if the SEC can't win at trial because the laws simply don't work, then that is the strongest proof possible that we need NEW LAWS. The farce of the SEC settlement pattern is that they get to tell the public "see we caught them" without ever having to really test whether the laws on the books actually prohibit the bad behavior in question.

I agree with your sentiments largely, but if the SEC can't win at trial it might not be that the laws don't work, it could be that the laws weren't broken.

besides the laws they did break, the banks write their own laws.

cefm: I can understand the SEC's position that they think something wrong was done, but they doubt they will prevail in a trial. That's kind of the point though. When the SEC points the finger at a company they say did wrong, but then settles with them, the company gets to tell the whole world they did nothing wrong at all. And if the SEC can't win at trial because the laws simply don't work, then that is the strongest proof possible that we need NEW LAWS. The farce of the SEC settlement pattern is that they get to tell the public "see we caught them" without ever having to really test whether the laws on the books actually prohibit the bad behavior in question.

We don't need "NEW LAWS." The companies wouldn't settle if they knew they'd win at trial. It's the SEC that's concerned with the expense of a trial, not the companies. If the laws weren't effective the companies would be happy to drop a few hundred million to make sure that the SEC would fark off for good.

imontheinternet: Fark Eric Holder. This guy should be the Attorney General.

In a better system of government he would be. In the American system he wouldn't have a chance in hell. Same goes for the aspiring Senator that wants to implement real campaign finance reform.

Thank God for Article III or this judge would be shown the political door. At least we have that going for us . . . .

The problem with taking cases to trial is that if the regulator loses due to a technicality, then the regulator will cease intervening in similar cases. In addition, the business may (and probably will) lose its certificate of authority to conduct securities trading. While I generally support breaking apart businesses that repeatedly violate the laws, shuttering GS or BoA or Citigroup or any other large financial entity would probably cascade throughout the rest of the world wide financial industry just like the collapse of Lehman Brothers did.

Personally, I say bring it on and get it over with. But there are potential repercussions that give any sane person pause.

BolloxReader: While I generally support breaking apart businesses that repeatedly violate the laws, shuttering GS or BoA or Citigroup or any other large financial entity would probably cascade throughout the rest of the world wide financial industry just like the collapse of Lehman Brothers did.

Well, the way I see it is if the company profited $500 million from an illegal transaction that that is the amount that the fine should be. There should be no profiting from illegal activities. if the SEC doesn't feel it can make its case then it shouldn't be threatening suit. If the penalties were in line with the behavior then you wouldn't have the companies making these kind of choices. As it stands now why wouldn't a bank grab $500 million from illegal activities if it is only going to pay approximately 20% out in fines? Most businesses would love a steady 80% margin on their activities.

KSCA75: Well, the way I see it is if the company profited $500 million from an illegal transaction that that is the amount that the fine should be.

Hell no.
It should be at least 700 Million, and after a certain arbitrary number, jailtime for the executives.

BolloxReader: The problem with taking cases to trial is that if the regulator loses due to a technicality, then the regulator will cease intervening in similar cases.

Or if they just lose on merit. That's what happened in the Bear Stearns case I believe. I think the SEC is legitimately unsure it has a winning case and whether it can actually prove wrondoing. Better to grab a few hundred billion and claim victory rather than prosecute for two years and risk getting nothing.

BolloxReader: In addition, the business may (and probably will) lose its certificate of authority to conduct securities trading. While I generally support breaking apart businesses that repeatedly violate the laws, shuttering GS or BoA or Citigroup or any other large financial entity would probably cascade throughout the rest of the world wide financial industry just like the collapse of Lehman Brothers did.

This is the other side. Banks are reluctant to go to trial because losing a case pertaining to one part of the business could be crippling to the whole. And regulators are rightly reluctant to risk forcing the death penalty on these instituions, when 95% of the employees had nothing to do with the alleged transgressions.

Look at the Arthur Anderson obstruction of justice charge - how many more than a handful of individuals were involved in that, and tens of thousands were thrown out of work? Then the case was reversed a few years later. What does the DoJ say then: "our bad, good luck with your careers"?

Weigard: Anyone else read that as Red Jerkoff?

yeah or Red Jakoff.... Either way it sounds like George Lucas made it up.

So if I understand this properly:

Citibank violates the law.
The fine is a fraction of their proceeds from breaking the law.
They also promise never to break the law again.
Future settlements don't require them to admit to wrongdoing so they didn't violate terms of previous settlements.

It is as if the penalty for robbing a bank were a $50 fine. I would be robbing as many banks as I could.

And this story only gets 38 comments.

jst3p: It is as if the penalty for robbing a bank were a $50 fine. I would be robbing as many banks as I could.

And this story only gets 38 comments.

Well it's not like it's news to anyone. It's like walking out your front door in the morning to find that the neighbor's dog has shiat on your lawn. The first few times it pisses you off but after a couple of years you either just shrug your shoulders and go to work or kill the dog.

Of course the SEC lowballs these settlements, and never really tries. Regulatory capture has its privledge.

Weigard: Anyone else read that as Red Jerkoff?

Is that like a Rusty Venture?

Urbn: Seriously, I'd rather the SEC take ALL of these bastards to court and lose a couple of the cases than to keep seeing these little fines being levied. Putting this all out there, having these execs and traders actually answering questions, in a public court of law is worth the extra taxpayer money.

Exactly. This judge is my favorite judge ever. His written rebukes of the SEC are typically comedic gold.