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Tuesday, October 25, 2016

Judge Rakoff Demonstrates What Having Guts Looks Like

Citigroup made shameful and dangerous decisions. It should have to explain itself.

On the whole, I have suggested a somewhat bleak view of our political system and our future prospects. But when there are moments and people to celebrate I want to do so. And we should all celebrate Judge Jed Rakoff. (As full disclosure, Judge Rakoff is a friend, and was a graduate school classmate at Oxford.)

On Monday this week, Judge Rakoff rejected an SEC offer to settle a securities fraud case against Citigroup that entailed a $285 million payment by Citigroup but not any admission of fault or wrongdoing. Judge Rakoff said the settlement terms were “neither fair, nor reasonable, nor adequate, nor in the public interest.”

This decision complicates the SEC’s life, and I would imagine that Citigroup is absolutely dead-set against acknowledging wrongdoing. But what Citigroup and other financial institutions did was wrong at a micro and a macro level and should not be glossed over.

First, what’s at issue? Citigroup created a class of securities, Class V Funding III, which consisted of bundled mortgage-backed securities (in the industry jargon they are referred to as “negatively projected,” i.e. they aren’t going to be worth much), then sold these securities to investors, and then bet against their own securities (and their own investors). Judge Rakoff adds some color to this: “This (Citigroup’s ability to ‘dump dubious assets on misinformed investors’) was accomplished by Citigroup’s misrepresenting that the Fund’s assets were attractive investments rigorously selected by an independent investment adviser, whereas in fact Citigroup had arranged to include in the portfolio a substantial percentage of negative projected assets and had then taken a short position in those very assets it had helped select.”

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  • orkneylad275

    How fortunate we are to have Judge Rakoff on the bench. How unfortunate we are to have the current management of the SEC. The judge couldn’t have been more correct. The SEC may be, to its lights, understaffed to the point it cannot pursue beyond a plea bargain matters like Citi’s conduct. We are even more unfortunate that the head of the SEC cannot bring the agency’s plight to the attention of someone in the administration who can remedy the situation. Easier to do nothing, of course, than to call attention to one’s plight, especially now.

    Given the history of the SEC, I doubt that were the economy booming the SEC would be seeking more staff to investigate suspected wrong-doers. Remember it was the SEC that didn’t understand the evidence of Bernie Madoff’s wrong-doings when it was presented to them twice by an outsider.

  • rustacus21

    …is always embodied in the bold acts of those who can both see justice & administer it, “w/out prejudice”. Judge Rakoff could be what America needs to shore up a cowardly, compromised judiciary, nation-wide, that shows contempt for the law, while snuggling up to big business & rich executives. 3 cheers for Judge Rakoff & may he be an inspiration to others in the judiciary field who hunger for a “REAL” role model…

  • DianneLee

    For decades now, the 1%ers have been buying politicians to write laws to allow them to become richer so they can buy more politicians who will write more law to allow them to become richer and etc etc etc. So there is a really good chance that however immoral their activities may have been, under the laws they paid to have written, they can get off totally free.

    The information below is a constitutional amendment being proposed by a group called “Move to Amend”. None of the currently proposed amendments address all of these issues:

    Corporate personhood, which gives corporations the rights of individual citizens, but with much more power

    The doctrine that money = speech, which allows rich individuals, including the candidates themselves, to donate huge amounts of money to buy our elections.

    Allows any organization other than a corporation to buy elections, which would essentiality allow business as usual among those whose have bought our government simply by setting up a noncorporate identity.

    The amendment below solves all of these problems, and this is the language that the amendment should contain:

    Section One
    Corporations are not people and can be regulated. The rights protected by the Constitution of the United States are the rights of natural persons only. Artificial entities, such as corporations, limited liability companies, and other entities, established by the laws of any State, the United States, or any foreign state shall have no rights under this Constitution and are subject to regulation by the People, through Federal, State, or local law.

    The privileges of artificial entities shall be determined by the People, through Federal, State, or local law, and shall not be construed to be inherent or inalienable.

    Section Two
    Money is not speech and can be regulated. Federal, State and local government shall regulate, limit, or prohibit contributions and expenditures, including a candidate’s own contributions and expenditures, for the purpose of influencing in any way the election of any candidate for public office or any ballot measure.

    Federal, State and local government shall require that any permissible contributions and expenditures be publicly disclosed. The judiciary shall not construe the spending of money to influence elections to be speech under the First Amendment.

    Section 3
    Nothing contained in this amendment shall be construed to abridge the freedom of the press.

  • Mother Outlaw

    Bravo, Judge Rakoff! Bravo, Bo Cutter! Bravo, Dianna Lee! With people like these, maybe justice will finally get done.

  • Mother Outlaw

    Bravo, Judge Rakoff! Bravo, Bo Cutter! Bravo, Dianna Lee! With people like these, maybe justice will finally get done.

  • Dave McGraw

    I like and agree with the language proposed for a new amendment to help the SEC regulate. Judge Rakoff is on the right track, and on this subject I support him. I detest the dishonesty among the wealthy financial corporations. I wonder what these CEO’s teach their children and grandchildren about being honest. Why the investors don’t take Citigroup to court bets me. If it where me I’ll drag their ass into court for misrepresentation. Of course they may have done that and settled out of court and kept it quite. Anyway where there is great money to be made is where the most greedy will head, and they don’t mind lying and cheating to get there.
    I might mention that the same can be said for our Congressman. We live in greedy times where honesty is a bygone ideal.
    God help us all.

  • MVH1

    It’s high time someone called these bastards out and made them squirm. They have to be stopped and it requires real courage and intellect to do it. I sincerely thank the judge. Maybe there is hope for this country after all.

  • engjimeer

    Congress has no will to do their jobs. I say WE THE PEOPLE lay them off and see how real Americans are leaning to survive with less. Oh – that will never happen…they would rather have it WE THE PRIVILEGED.

  • Srfnff

    Isn’t the judge just doing what he should be doing? It’s a sad state of affairs when a person is deemed a hero for doing his job…administering justice. Hey, the garbage man just picked up the garbage. About time.

  • Hankk

    Good job Judge keep up the good work. I march with Occupy and just add something to my sign that will make the GOP turn blue. My sign read “AFTER 30 YRS. OF TAX BREAKS (WELFARE) FOR THE WEALTHY & CORPORATIONS THE GOP STILL SINGS THEY ARE THE ONES THAT CREATE JOBS AND KEEP OUR ECONOMY STRONG, THEN SHOW US THE JOBS” Now I have added ” I JUST WENT AND REGISTERED TO BE A DEMOCRAT AND WILL VOTE A STRAIGHT TICKET.” You know if all OCCUPY SUPPORTERS would do the same thing, I think the attitudes in congress would change. HANKK, MI