Courtesy of James Kwak of Baseline Scenario
This week’s Atlantic column (below) is my somewhat belated response to Judge Jed Rakoff’s latest SEC takedown, this time rejecting a proposed settlement with Citigroup over a CDO-squared that the bank’s structuring desk created solely so that its trading desk could short it. I think Rakoff has identified the heart of the issue (the SEC’s settlements are unlikely to change bank behavior, so what’s the point?) but he’s really pointing to a problem that someone else is going to have to fix: we need either a stronger SEC or stronger laws. I’d like to see an aggressive, powerful SEC that can deter banks from breaking the law, but we don’t have one now.
via What Good Is the SEC? « The Baseline Scenario.
Too Big to Stop: Why Big Banks Keep Getting Away With Breaking the Law
For the country’s biggest financial institutions, it’s still worth it to break the law, because the government has no way to make the banks pay for acting illegally
Reuters
Move along, nothing to see here.
That’s been the Wall Street line on the financial crisis and the calamitous behavior that caused it, and that strategy has been spectacularly successful. Since Spring 2010, financial institutions’ predatory practices have fallen off the front pages of newspapers, replaced by manufactured fears of over-regulation and — thanks to an assist from the European continent — an Orwellian belief that government debt lies at the root of our economic problems.
Occasionally, a news event brings the need for financial reform momentarily into the partial spotlight, like last week when Judge Jed Rakoff rejected a proposed settlement between the SEC and Citigroup over a complex security called a CDO (actually, a CDO-squared) that the bank manufactured and pushed onto investor clients solely so it could bet against it. In April 2010, when the SEC sued Goldman over similar behavior, that was big-time news for weeks. But Citigroup’s behavior in "Class V Funding III" was far worse.
