Matt Taibbi, on the SEC attempt to settle the latest fraud case against Citigroup—a settlement so watered-down that
the judge in the case has pilloried the SEC for even proposing it:
Over the last decade, Citi has repeatedly been caught committing a variety of offenses, and time after time the bank has been dragged into court and slapped with injunctions demanding that they refrain from ever engaging the same practices ever again. Over and over again, they’ve completely blown off the injunctions, with no consequences from the state – which does nothing except issue new (soon-to-be-ignored-again) injunctions.
In this current case, this particular unit at Citi had already been slapped with two different SEC cease-and-desist orders barring it from violating certain securities laws. [...]
But the SEC avoided the issue of the 2003 injunction by charging Citi with a different type of fraud. But, as Bloomberg points out, it probably wouldn’t have mattered much if they had accused Citi of violating the 2003 injunction, since the bank had already done that once and not been punished for it [...]
As Taibbi points out, it isn't just the dollar figure of the settlement that smells ($285 million, in a case that cost Citigroup customers $700 million), but the apparent lengths the SEC has gone to avoid charging Citigroup with anything more serious. The case in question is one of Citigroup bundling bad mortgages, selling them to customers as good mortgages, then betting against the whole rancid pile itself. Fraud, pure and simple. And from a unit that was already under multiple court injunctions for past frauds.
But the SEC studiously avoided even bringing up those past events. It didn't actually charge the company with fraud, just with "negligence," which is on its face ridiculous: If the company knew enough about what it was selling customers to bet against it, it damn well knew that what it was selling was not what it was telling those customers. It doesn't try to bring any of the executives who had to approve of the scheme to trial, it doesn't seek enforcement of the past injunctions: The "settlement" doesn't even require an admission of wrongdoing on the part of the company.
It is, in other words, seemingly the weakest possible prosecution of the case possible. By completely ignoring, yet again, fraudulent activity by the company (and the very fraud that, repeated across multiple companies, led to a financial meltdown, no less!), it begs the question of why on earth the SEC even exists. How many times can a company commit a massive fraud before a (for them) pissant little fine is no longer sufficient action? How much profit can a company make, via fraudulent behavior? If a company can be as crooked as it wants, and the only punishment government will inflict is a small tax on their crookedness, then why would anyone be the slightest bit surprised if the whole damn encompassing industry turned out crooked?
The SEC's lax enforcement of its own rules, coupled with the constant trafficking of personnel to and from the very companies being regulated, leads to the obvious question: Is the SEC, itself, crooked? Are they going out of their way to procure such lenient settlements, and to willfully ignore past infractions, as some sort of banks-are-better-than-us economic policy—or just as personal favor to those same banks?
This is exactly what the Occupy movement, not to mention most of the rest of the public, is talking about. There is no substantive punishment for crooked behavior on Wall Street. Even when that behavior threatens the entire nation's economy, which should be a damn scary thought right there, it will be met only with an easily payable cash fine, and nothing else. Bonuses will remain the same. Nobody in a position of significant power will go to jail. No past injunctions will be enforced, no serious obstacles to committing similar frauds in the future will be enacted ... nothing. Not a damn thing.
The bankers are, through the SEC and other government agencies, regulating themselves. The Treasury Department is run for their benefit, not for the benefit of the nation. There seems nothing government can, or at least, is willing to do to stop outright criminal behavior among the nation's largest companies.
Why? Official spokesmen can hem and haw all they like, but at this point there has been a clear pattern established. In this case, in the case of Bank of America, in the foreclosure-fraud settlement pushed on the state Attorneys General: There's apparently nothing a bank can do that will result in the government coming down on them with a less-than-silken touch.
Here in California, we have a three-strikes law. That means that if a twice convicted felon commits a third crime, that's it. The hammer of justice comes down, and it's 25 years to life for you. Despite egregious, even ridiculous examples of excessive punishments doled out by the law, law-and-order types love it. It's so punitive. It's so final. Nobody, though, seems to have much interest in doing the same for corporate or financial crimes. Can you imagine? Citigroup, with multiple serious fraud cases behind it, getting something harsher than a maybe-we-did-it, maybe-we-didn't fine? Oh, heavens, imagine the drama that would ensue if a high-level agency official even suggested such a thing.
I asked whether the SEC, in handling these cases with such leniency, was itself just plain crooked. A great many people have been wondering the same thing. The appearance of corruption is widespread, what with the constant shuffle of financial executives into and out of the very government positions tasked with regulating the companies they came from (or will soon be headed off to). That, right there, is reason enough to suspect the government of insincerity in attempting to enforce its own laws. The resulting actions taken by those agencies does precious little to disprove that initial suspicion.
The Occupy movement is premised not just on a loss of faith in Wall Street, but in government's ability or willingness to act as good-faith policeman of corporate wrongdoing. We know that companies can be crooked. What we don't know, yet, is whether we have a government that can still claim any remaining credibility in protecting against such acts. The judge in this latest SEC settlement was in fact asking that precise question as well.
So far, there nothing in the SEC's recent history to suggest their answer to the judge will inspire confidence. Citibank, Goldman Sachs, and other companies may have robbed their own customers, but the SEC has done little more than offer to drive the getaway vehicle.