A Judge Fights Wall Street When SEC Doesn’t

Posted by | November 13, 2011 19:49 | Filed under: Top Stories

by Stuart Shapiro

The Securities and Exchange Commission (SEC) is notoriously underfunded.  The firms it regulates, Wall Street’s finest and less than finest, are overfunded.  This leads to an enforcement challenge from SEC.  SEC has responded by often offering settlements to firms accused of breaking the law.  These settlements are often cushy and involve no admission of guilt.  Matt Taibbi has the story of one judge who wouldn’t stand for it.

Judge [Jed] Rakoff balked at the settlement and particularly balked at the SEC’s decision to allow Citi off without any admission of wrongdoing. He also mocked the SEC’s decision to describe the crime as “negligence” instead of intentional fraud, taking the entirely rational position that there’s no way a bank making $160 million ripping off its customers can conceivably be described as an accident.

I can’t get as angry at the SEC as Taibbi, since they have their hands tied by their funders in Congress and Congress doesn’t want to see SEC prosecute their biggest donors.  So thank goodness for Judges like Rakoff because settlements like this are essentially “get out of jail free” cards and licenses to break the law again.

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Copyright 2011 Liberaland
By: Stuart Shapiro

Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.

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