Just say NO to "Too Big to Fail" Settlements...

A judge rejects the Fed's deal, and orders the attorneys to prepare for trial ...

Go get 'em, Judge Jed:

In a powerful rebuke to a federal agency responsible for policing Wall Street, U.S. District Court Judge Jed S. Rakoff criticized the SEC’s decision to charge Citigroup with negligence instead of knowing or intentional fraud.

He also slammed the Securities and Exchange Commission for following its standard practice of allowing defendants to settle charges without admitting or denying wrongdoing.Citigroup had agreed to pay $285 million to settle allegations that it misled investors about a complex investment tied to the deteriorating housing market in early 2007. The bank used that investment to bet against the investors, the SEC said

Citigroup made $160 million in profit on the deal, and investors lost more than $700 million, the SEC alleged.

Summarizing the SEC complaint, Rakoff wrote that the transaction allowed Citigroup to “dump some dubious assets on misinformed investors” at a time when the bank saw that the market for mortgage-backed securities was beginning to weaken.

In a sharply worded order, Rakoff faulted the SEC’s handling of one of the bigger enforcement cases to emerge from the financial meltdown. The court “concludes, regretfully, that the proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest,” Rakoff wrote.

If the SEC’s allegations are true, Rakoff wrote, “this is a very good deal for Citigroup.”If the charges are untrue, he said, “it is a mild and modest cost of doing business.”

“It is harder to discern from the limited information before the Court what the S.E.C. is getting from this settlement other than a quick headline,” Rakoff wrote.

“Even in our nation, apologists for suppressing or obscuring the truth may always be found,” Rakoff wrote. “But the S.E.C., of all agencies, has a duty, inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances.”

Mmmm ... language I like!