Judge Rakoff Stands up for the Little Guy

Just when you think cynicism rules the land and nothing will ever get any better because everyone's in someone else's pocket, through campaign contributions to the left and right and everyone in between, or regulators going soft on misdeeds because of plans to eventually fence-hop to the private sector to land cushy jobs, or Goldman Sachs populating the upper ranks of the U.S. Treasury with its own operatives ... well, along comes this heartening news:

A federal judge on Monday rejected a $33 million settlement between the Securities and Exchange Commission and Bank of America Corp., saying the SEC's accusations of inadequate disclosure by the bank over bonuses paid at Merrill Lynch must now go to trial.

The judge was no doubt incensed: the $33 million would have been paid by the shareholders of the bank -- essentially the same ones who did nothing wrong and got screwed in the first place! The U.S. district judge, Jed Rakoff, has immediately been lionized as a new and rare kind of hero. Basically, he called out the SEC for an all-too-familiar bit of puppet theater: SEC brings civil charges against some alleged wrongdoer, the two sides wrangle behind the scenes, both eventually agree on a relatively small fine while the accused party never has to agree to guilt or wrongdoing.

But Rakoff, bless his justice-loving soul, would have none of it:

Rakoff, in his ruling, found that the settlement "suggests a rather cynical relationship between the parties: the SEC gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger, the bank's management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth."

Here's a short roundup of what some other bloggers are saying about the judge who dares to stand up for what's right:

Yves Smith at naked capitalism:

Oooh, this is turning out to be fun. Judge Jed Rakoff is not putting up with Wall Street business as usual ... and SEC lack of spine.

Zero Hedge:

One of those hopefully seminal moments, when someone, somewhere decided to take a stand against the perpetual engine of corruption, greed, and cronyism.

Felix Salmon:

I hope this sends a clear signal to Mary Schapiro: quiet bilateral settlements with companies should come to an end, and as a rule all companies paying fines should at the same time admit, in public, exactly what they did wrong.

Randomly Noted:

I recognize that Rakoff is known for his maverick ways, and I also realize there’s a certain Schadenfreude involved in figuratively watching a judge point a finger at the executives atop a big bank as the country nears the one-year anniversary of an economic crisis largely caused by a finance industry gone awry. None of this detracts from the refreshing simplicity of Rakoff’s approach, and his questions.

Crime and Federalism:

Word on the street is that you do not play Judge Rakoff for the dupe.

Contrarian Musings:

It always irks me when companies or executives are allowed to pay a fine without admitting wrongdoing and finally a judge has the guts to call a spade a spade.

jr deputy accountant:

Go Judge Rakoff, go!!

PrefBlog:

Jed Rakoff for the Supreme Court!