Maverick Judge Jed Rakoff Stares Down The Street

One of the biggest problems with Wall Street’s malfeasance is how the ruling elite view legal settlements – as little more than an acceptable cost of doing business.

Well, no more.

Thanks to Judge Jed Rakoff we may see some real regulatory action leading to good old-fashioned investigations, perp walks, and even jail for the guilty.

I’m not talking just about the Bernie Madoffs or the Raj Rajaratnams either. I’m talking about potentially CEOs and even entire corporate boards.

Judge Rakoff recently rendered a 15-page decision rejecting the U.S. Securities and Exchange Commission’s (SEC) $285 million settlement with Citigroup Inc. (NYSE: C) over toxic mortgages, calling it “neither reasonable, nor fair, nor adequate, nor in the public interest.”

This is important because settlements like these have been a farce for years – little more than the financial equivalent of a parking ticket and having about as much impact.

In fact, in a world where banking secrecy is paramount and investment firms like Goldman Sachs Group Inc. (NYSE: GS), JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corp. (NYSE: BAC) and others rule the roost, they’re little more than obfuscations of the truth.

The investigations into these banks are toothless or highly secretive at best. Rarely does the public see anything even remotely resembling full disclosure.

Instead we’re supposed to be placated by headlines insinuating that the SEC, the National Futures Association (NFA) and more than 20 other regulatory agencies are looking out for our best interests.

Who are they kidding?

A Drop in the Bucket

Remember the $550 million fine Goldman was forced to pay for its role in toxic credit default swaps (CDOs)? At the time it was the largest ever levied.

SEC officials couldn’t stumble over themselves fast enough nor get enough sound bites. I recall lots of PR shots with earnest-looking people evidently proud of themselves for having made Goldman pony up at the time.

And the mainstream press loved it. But there was one tiny problem.

The firm booked $13.3 billion that year. Paying off the SEC in a settlement that neither admitted nor denied wrongdoing was an acceptable cost of doing business that amounted to a mere 4% of revenue.

The proposed Citi settlement was much the same. It would have required Citi to give up $160 million of alleged ill-gotten profits, $30 million of interest, and a $95 million kicker for negligence.

Bear in mind, Citi reported full-year net income of $10.6 billion on revenue of $60.5 billion in 2010 which means that, like the Goldman fine, the settlement is a drop in the bucket at a mere 1.50% of net income.

I think Judge Rakoff’s ruling has been a long time coming. And I love the fact that he specifically called out the Citi settlement as too lenient – especially when it also potentially allows Citi to skate on reimbursing investors for the $700 million the firm lost as part of its toxic mortgage trading.

You may not realize this, but private investors cannot bring securities claims based on negligence. In my mind, they should be able to, but for now this is the way the law stands.

The way I see it, Rakoff’s decision finally gets at the core of what caused the financial crisis: toothless regulators beholden to the very powerful elite they were supposed to keep in check.

I am all too glad to see him show the public the first glimpse of backbone we’ve seen yet.

Washington, are you watching and listening?

Sitting on the Bench, Swinging for the Fences

Judge Rakoff noted in his ruling that there is an “overriding public interest in knowing the truth.”

Yes, there is.

And as Judge Rakoff put it, the SEC’s core duty is to “see that the truth emerges.” In the event that it doesn’t as part of the settlement process, “courts must not, in the name of deference of convenience, grant judicial enforcement, to the agency’s contrivances.”

I did some checking and I learned that this is not the first time Rakoff has stuck it to the SEC.

Apparently, he’s the one who made headlines when he initially rejected the BofA settlement related to that bank’s shotgun takeover of Merrill Lynch & Co., a fact I’d forgotten.

At the time, Rakoff rejected the SEC’s $33 million BofA settlement on the grounds that it punished shareholders. The SEC then came back with a much more realistic $150 million agreement.

Some think Rakoff has gone too far. They worry that judges have no business interfering in agreements ostensibly reached by private parties.

But I disagree. I believe the SEC is the public.

And the public has the right to know about any case where the transparency of the financial markets (or lack thereof) has so impacted the markets as to destroy the wealth of millions of hard working people and bring the global markets to the edge of oblivion.

Frankly, I’d love to shake Judge Rakoff’s hand.

I hope what he’s done encourages judges to finally stand up for the body of law they supposedly represent and the public that it’s intended to protect.

Will The Stock Market Crash In 27 Days?

This little-known market timing indicator just gave an unmistakable signal of where the market is headed next!

Click Here to See If The Market Will Crash In 27 Days!



Your Guide to Financial Freedom

We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the “flattening of the world” continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially ; and a technological revolution even in the most distant markets on the planet.

And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.

The bottom line is this: With U.S. influence slipping, and the dollar declining as well, investors who think too narrowly about this transformation will face years of meager returns. But those who embrace this new global reality can make themselves very wealthy.

Consider what the World Bank and the prestigious McKinsey Global Institute recently concluded in their yearly reports on global finance; # From 2005 to 2010 alone, worldwide wealth will soar from $118 trillion to more than $200 trillion – with the newly capitalist markets of Asia and Europe accounting for the biggest share of that gain.

# Over the next 25 years, America’s share of the worldwide economic pie will slip from 28% to 24%… # Even as Asia’s share almost doubles ;which means it will account for a whopping 55% of the global economy by 2030.

Unfortunately, without guidance, few investors will be able to capitalize on this once-in-a-generation opportunity with knowledge and safety.

That’s where Money Morning comes into play;

You see, one sad fact remains true on Wall Street: If you’re not a partner in, or client of, a major investment bank – or if you don’t have a securities portfolio worth $5 million or more – you are most likely out of luck.

The big brokerage firms are making a killing on the global boom. Yet Wall Street reserves the timeliest information – and the best profit opportunities – for its partners or wealthiest clients.

And the Securities and Exchange Commission doesn’t help the everyday investor much either. The second sad fact is this: While you can buy any U.S. or Canadian stock you want, the SEC prohibits you from purchasing many of the available international stocks.

The reason: Foreign companies that haven’t registered with the SEC are off-limits to most U.S. individual investors.

And with Sarbanes-Oxley discouraging foreign firms from listing their shares on U.S. indexes, fast-growing companies from abroad have had little incentive to care!

Yet Money Morning can help change all this for investors intent upon making sizeable, steady and safe gains – and who want to capitalize on the biggest profit opportunity we’re likely to see in our lifetime.

We exist to even the playing field; to help you reclaim control of your own financial destiny. Our worldwide research staff includes former investment bankers, international financiers, emerging markets specialists and veteran financial journalists.

Our experts know that certain capital flows essentially act as a “leading indicator” of future profit opportunities. These are opportunities that you won’t be reading or hearing about anywhere else. Each weekday morning, in a readable style you can digest in just a few minutes, you will reap the benefits of our research and expert experiences. Indeed, Money Morning will bring you:

# The latest reports on China, Japan, Emerging Europe, and the other global hot spots where most investor wealth will be created in the months and years to come… # Reports on companies you’ve likely never heard of – even though they’re poised to sell billions worth of their wares to “new middle class” customers around the world… # Information on the U.S. companies shrewd enough to cash in on this boom in global;

# The latest developments in banking, interest rates, foreign investment and other global investing topics; # Advice on how to invest in currencies, precious metals, commodities and energy

# Inside news on the hottest investments, including water, uranium and private equity… # And news on rules and regulations, financial trends and strategies – and any other “market intelligence” that you will need to become a shrewd-and-successful investor in the greatest global investing boom most of us will ever see.

And it’s all delivered directly to you – and at no charge.

Here’s to securing your financial freedom in the new global economy.

Good Investing,

Mike Ward

  • http://omegacabinets.livejournal.com/766.html Fallon Tooze

    Whats up very nice site!! Guy .. Beautiful .. Wonderful .. I’ll bookmark your web site and take the feeds additionally…I’m glad to seek out a lot of helpful info right here in the publish, we’d like develop extra strategies on this regard, thanks for sharing. . . . . .