Judge Rejects Settlement Between SEC and Citigroup
Wall Street does not run America; the citizens of this great nation are adamant about that belief and they took to the streets this fall to demonstrate their insistence. Judge Jed Rakoff, a New York district Judge has thrown out the settlement between the Securities and Exchange Commission (SEC), the government entity tasked with ensuring Wall Street does not break financial laws and regulations, and Citigroup, one of the largest banking corporations in the world. Rakoff was clear and blunt, stating that he sided with the American people, not the big banks.
“In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers,” said Judge Rakoff. “Even in our nation, apologists for suppressing or obscuring the truth may always be found. But the SEC, of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this court must not, in the name of deference or convenience, grant judicial enforcement to the agency’s contrivances.”
The settlement, which would have been for $285 million, was shot down Monday for many reasons; the primary reason being that the deal was nothing more than a slap on the wrist. Judge Rakoff calls the settlement “neither fair, nor reasonable, nor adequate, nor in the public interest.” The SEC and Citigroup insisted the settlement was fair, and reflected a number that would have been reached had the settlement been established in court. Judge Rakoff sharply disagreed, saying that:
“The SEC’s longstanding policy — hallowed by history, but not by reason — of allowing defendants to enter into consent judgments without admitting or denying the underlying allegations, deprives the court of even the most minimal assurance that the substantial injunctive relief it is being asked to impose has any basis in fact.”
The facts in the case are clear: Citigroup bought up deadly toxic mortgages, and bet on them to fail–this is the basis of the SEC’s accusations–which resulted in losses of over $700 million for private investors, while Citigroup made off $160 million richer. In this $285 million deal, those private investors will only receive a cut of $95 million, while Citigroup glides gracefully away without even admitting any wrong doing. This did not sound like justice to Jed Rakoff, nor should it. The SEC is accusing Citigroup of knowingly betting against their own investments, expecting them to fail. let me repeat that; the Securities and Exchange Commission, the very government entity tasked with policing big money from selling harmful investments, is accusing Citigroup of knowingly selling harmful investments and actually hoping that these investments tank. This is the very thing the SEC was created to protect against; therefore, the question begs to be asked: if the SEC not only fails to do its job, but allows big banks to continue harmful practices, admit no guilt, and ride off into the sunset with massive profits, why not start our government spending cuts by eliminating the SEC? Without drastic reforms it seems evident that no SEC would clearly accomplish more than the current commission.
The most frustrating thing about this deal is that this is not even the first time the SEC has found evidence against Citigroup concerning foul play with investments. In fact, just since 2003 the SEC has accused Citigroup of securities fraud on five separate occasions. Each of these accusations has led to Citigroup essentially promising to start following the rules, but admitting no guilt, and receiving orders not to follow the same types of illegal practices. Thankfully Judge Rakoff has said that will end here. Judge Rakoff is a true judiciary, and has made a stand in saying that Citigroup can no longer be above the law; they have clearly violated previous injunctions and needs to be held accountable. Citigroup has posted a profit of $3.8 billion this quarter alone; this means that the $95 million the deal would give back to the investors who lost $700 million represents only two and a half percent of their earnings in the last three months. Judge Rakoff has thankfully rejected that deal, taking a stand, insisting that Wall Street cannot continue mugging Americans and being protected by the government while doing so. Not only should investors be repaid all $700 million–a mere 20% of the Citigroup quarterly profit–but those responsible need to be held accountable. Judge Rakoff is irked that nobody in the Citigroup organization is being required to admit wrong doing; however, millions of citizens and thousands of protesters are enraged that nobody in Citigroup is being sentenced for their crimes. As a further slap in the face of justice, the only defendant the SEC named in this suit is a lower level banker who clearly could not have acted alone, or had the power to do so.
In the financial collapse, tax payers were asked to support the banks which clearly had no regard for their well-being. The federal government bailed out Citigroup with $350 billion while the organization took losses of $65 billion, all at the expense of shareholders and investors. It was the tax payers, the very people Citigroup bet against and stole money from, that kept the bank afloat. They were termed as too big to fail, and have ever since also acquired the label of too big to follow the law. No group, person, firm, or organization should be above the law here in the United States. This is the land where justice–true justice–was reborn in the modern era. We stand for justice and equality in America, and we should no longer allow people or firms to skip around the bounds of the law on account of their bank accounts. The banks engineered the financial collapse that has led to a recession costing the nation immeasurable amounts of money, jobs, quality of life, and of course, justice. The constitution is not for sale to the highest bidder; money does not buy protection from the law. To date, not a single banker or firm has been held responsible for what they did to the American economy and people, that is what started the occupy Wall Street protests in the first place. President Obama had, at one time, attempted to construct a deal with major Wall Street banking firms which would keep all state attorneys general and the federal government from bringing criminal prosecution against the big banks. Unfortunately, the case now between the SEC and Citigroup is not criminal, but civil; meaning that no formal punishment or sanctions can be taken if Citigroup is found guilty, only monetary payments can be made in a civil settlement. The federal government has yet to give us any good reason for refusing to prosecute these banks, (the Justice Department is insisting that it has investigations currently underway) so people have taken matters into their own hands. An online message spread like wildfire, and set up an official “dump your bank day” when customers took their money from big banks to nonprofit credit unions. Thus far, 650,000 people have taken $4.5 billion away from banks, and into credit unions following the bank dump. Still, this is not enough. The federal government needs to do something, which is why it gives so many people hope to see one man, Judge Jed Rakoff, taking a stand with his branch of government.
This is not the first time Judge Rakoff has stood on the side of the people, and against the big banks. Judge Rakoff rejected a $33 million settlement between the SEC and Bank of America Corp. in 2009 calling it a breach of “justice and morality.” that particular settlement pertained to Bank of America Corp. attaining Merrill Lynch in 2008, and paying $5.8 billion in bonuses while the company lost $27.6 billion that year. Enough is enough, and Judge Rakoff has made that statement. Unfortunately, it may not mean much; the markets barely blipped when the announcement was made to reject the deal signifying that investors are not too worried about the impending civil trial, which is set to begin July 16. Still, we can take solace that injustice has been denied, and there is a sliver of hope for true justice against the banks which destroyed countless American lives. Thank you Jed Rakoff.
1 December, 2011
Posted on December 4, 2011, in Patriotslog Articles, Politics and tagged $285 million settlement, Bank of America, Citigroup, corruption, economy, Jed Rakoff, SEC, settlement, Wall Street. Bookmark the permalink. 10 Comments.