SEC Slaps Bankster’s Wrist

The headlines sure looked great.  A $285 million settlement sounds like a lot of money, but it falls well short of what the giant corporate criminal, Citigroup, would even consider nuisance, let alone painful.  And while it does make good on investors’ losses, there are many others, who were damaged, by Citigroup’s crime, left out in the cold.

As the housing market began its collapse, Wall Street firms and sophisticated investors searched for ways to profit. Some of them found an easy method: Stuff a portfolio with risky mortgage-related investments, sell it to unsuspecting customers and bet against it.

Citigroup on Wednesday agreed to pay $285 million to settle a civil complaint by the Securities and Exchange Commission that it had defrauded investors who bought just such a deal. The transaction involved a $1 billion portfolio of mortgage-related investments, many of which were handpicked for the portfolio by Citigroup without telling investors of its role or that it had made bets that the investments would fall in value.

In the four years since the housing market began its steady descent, securities regulators have settled only two cases related to the financial crisis for a larger sum of money. This is also the third case brought by the S.E.C. accusing a major Wall Street institution of misleading customers about who was putting together a security and about their motive. Goldman Sachs and JPMorgan Chase & Company both settled similar cases last year.

The settlement will refund investors with interest and include a $95 million fine — a relative pittance for a giant like Citigroup. On Monday, the company reported that in the third quarter alone it earned profits of $3.8 billion on revenue of $20.8 billion. The settlement may also have trouble getting approval from Jed S. Rakoff, the federal district judge in New York who must ultimately sign off on the fine and who has taken a hard line on S.E.C. settlements… [emphasis added]

Inserted from <NY Times>

I have no doubt that this settlement is good for the investors Citigroup defrauded, and that some of them are truly needy, pensioners, and the like.  Most, however, are probably wealthy investors and speculators, so once again, the well to do get the bail out, while the 99% twist in the wind.  This settlement does nothing to help the victims of ninja loans who lost their homes, the people who  faithfully paid their mortgages, while foreclosures in their neighborhoods sucked the value from their homes, or the millions hurt by the recession that the collapse of the real estate market engendered, people that lost jobs and small businesses.

Judge Rakoff, could nix the deal.  He has an excellent record on the bench, because he was appointed by a Democrat.  Rakoff rejected a similar settlement with Merrill Lynch.  I hope he does here too, because a mere $95 million fine will only encourage Banksters to do it again.  I’d like to see what kind of punitive damages a jury would assign.