I had previously written that Rakoff's ruling was an incredibly important one, while noting that Rakoff had "faced a significant amount of scrutiny from people who think that the SEC 'can't afford' to prosecute cases like these, because the cases are too expensive and the banks have such amazing legal resources". Still, I was hopeful that Rakoff's rebuke might force the SEC into action, as public pressure mounted and opinion coalesced against the banks. No such luck.
Judge Rakoff got to have his insurrection when he rejected the SECs $285 million settlement with Citigroup last month.
Now it's the SECs turn. According to the Wall Street Journal, the agency is planning an insurrection too — against Judge Rakoff. The agency will expend its resources creating a five person panel to appeal the Judge's decision.
You'll recall that instead of allowing the agency to take Citi's money and be done with its mortgage-backed security suit against the bank, Judge Rakoff asked both parties to go back to the drawing board.
In doing so, Judge Rakoff bucked a practice that's been in play since the 1970s. The SEC has allowed banks to pay small sums ('pocket change," in Rakoff's words) and neither confirm nor deny their guilt in civil suits against the agency. Rakoff thinks that practice is unjust.
So given the Judge's order, you would think the SEC might prepare itself to go to trial with Citi so the bank could maintain its innocence (a scary prospect for both parties). Or that both parties, at the very least, would get their calculators out to tabulate a sum that might make the Judge happy.
Not so. The SEC would prefer to create a 5 person commission to appeal the Judge's ruling and nip this problem in the bud.Right. So the SEC "can't afford" to prosecute cases against banks that consistently and repeatedly perpetrate fraud against the American public, but it can afford to mount appeals against judges who stand in their way. Sounds great.
What's so disheartening about this turn of events is that it's seemingly indicative of a new way of doing business in Washington, that of the politics of intimidation. The first clear example of this wave of bullying came after S&P's well-publicized downgrade of U.S. sovereign debt in August--rather than humbly taking their lumps and acknowledging some flaws in the way that they did business, Washington instead elected to turn their ire on S&P with a clearly retaliatory investigation of the agency's business practices.
The message to S&P was clear, as is the message here to Judge Rakoff--we don't care who you are, or what you think. If you disagree with the way we do business, we will do everything we can to make your life miserable, or at least marginalize your voice. That's not the America that I know and love, and I think it's a very sad turn of events for all Americans. Our political system and democratic process must be respected, even when that means that government bodies may (on occasion) face steep criticism for their actions.
While you may not agree with the assertion that "dissent is the highest form of patriotism" (or, as some have reminded us, "descent the highest form of patriotic"), you must certainly acknowledge that the politics of intimidation lead us down a very dangerous path. A government that bullies its opponents into silence is not a democracy at all--it's a thinly veiled dictatorship, with "free speech" a mere mirage.
If there is any hope for our democracy going forward, here's hoping that whichever judge hears the SEC's appeal affirms Judge Rakoff's decision. It's the only way that we can ensure that equality under the law persists (or returns) in our country--without equality under the law, there cannot be a true democracy at all.
Of course, even with an affirmation of Rakoff's ruling, the SEC can still simply begin making its settlements outside of the court system entirely, which still misses the point. I yearn for a time that government bodies treat dissent as an opportunity for soul-searching and reform, rather than as an opportunity for chest-pounding and muscle flexing. In my opinion, the tighter these agencies try to hold onto their power and preserve their existing processes, the more they lose credibility altogether. And a government without credibility cannot survive.