Federal Judge to SEC: Stop Going Soft on Banks!
In a follow up to the recent $285 million settlement reached between the SEC and Citigroup, someone other than Roy Oppenheim is starting to ask the hard questions of why do the banks keep getting a “get out of jail free card”? Roy Oppenheim on Reducing Mortgage Fraud, Banks Take Responsibility | South Florida Law Blog.
It was reported in the New York Post that federal court Judge Jed Rakoff placed SEC Chief Mary Schapiro in the hot seat, when he ordered a court hearing in response to the “sweetheart” settlement agreement reached between the SEC and Citigroup.
It appears that SEC chief Schapiro is having trouble grasping this simple concept:
stop going soft on the banks!
Judge Rakoff made an interesting point when he asked why the settlement agreement should be accepted when Citigroup is refusing to admit or deny any fraudulent bank practices. The obvious answer is no, such a settlement should not be accepted.
Judge Rakoff stated that the purpose of the SEC is to “ensure transparency in the financial marketplace.” If the SEC wants to live up its purpose, it needs to keep up the pressure on top banking officials.
If there is even a remote chance of changing the banking industry, Giants like Citi need to be held accountable for their wrongdoings. But with the SEC’s failure to actively investigate and charge banks with securities fraud, it’s eventually the homeowners that pay the high price.
The SEC had brought similar charges against Goldman Sachs back in 2010 which culminated in the largest fine to have ever been imposed on a financial institution, $ 550 million. And yet CitiGroup, which is one of the largest financial institutions, is getting a sweet deal in only being asked to pay less than one-fifth of Goldman Sachs’ penalty.
Back in 2009 Judge Rakoff refused a deal that was reached between the SEC and Bank of America for $33 million in response to allegations that the bank had misled shareholders over its acquisition of Merill Lynch. He finally agreed to accept the settlement, once it was raised to $150 million.
Judge Rakoff also asked “How can securities fraud of this nature and magnitude be the result simply of negligence?” He is absolutely right in demanding answers to these types of questions. It’s hard to imagine how there could have been such a lack of oversight to a portfolio worth over $1 billion.
Homeowners need more judges like Judge Rackoff. It’s about time the courts start protecting consumers and start holding the banks accountable, since the SEC is forgetting its purpose is to ensure the market’s efficiencies and not the Banks. If the government is serious about deterring mortgage fraud, maybe it needs to break up the banks just as this article on CNBC suggests.
Just like the little guys, such as Carol Asbury, the Florida title attorney who is facing up to 20 years in jail, corporate executives also need to be held accountable. If the banks are broken up, this will allow the shareholders to have more control over corporate governance and enable the shareholders to remove corporate officers that are under-performing or engaging in practices that can be detrimental to the company and the financial markets in the long run.
By having the power to remove executives that are not acting in the best interest of the shareholders, they will have the ability to effectively decrease the chances of finding themselves defrauded by the banks.