In applauding the smackdown of the Securities and Exchange Commission regarding its $285 million penalty against Citigroup, Matt Taibbi wrote, “The [Judge Jed] Rakoff ruling shines a light on the way these crappy settlements have evolved into a kind of cheap payoff system, in which crimes may be committed over and over again, and the SEC’s only role is to take a bribe each time the offenders slip up and get caught.”
So-called objective reporters saw things differently. Edward Wyatt of The New York Times opened his news report by defending the poor, beleaguered SEC:
When a Wall Street firm trades billions of dollars of securities a day and sometimes showers seven-figure bonuses on top executives, regulators are hard-pressed to fashion a penalty that really hurts.
He added that Rakoff
… added another dimension to that quandary on Monday when he told the [SEC] that he could not determine whether [its] penalty against Citigroup was adequate if he did not know what had really happened.
In other words, the SEC isn’t an integral part of the corrupt system that allows Wall Street firms to get off with a slap on the wrist, without admitting to fraud or even discussing the facts of a case in a public court. The SEC is a victim of a policy dating from the 1970s, before the Wall Street firms joined with commercial banks, effectively making them too big to police.
Wyatt quoted an SEC official’s explanation for why the agency makes secret settlements with Wall Street firms:
“We agree to settlements because they achieve for us largely everything that we could hope to get should we take the case to trial,” Robert Khuzami, the S.E.C.’s enforcement director, said in an interview this month. “I think the message is pretty clear. And the investors get their money much faster, because, as you know, lawsuits can take years.”
Which is total bullshit to anyone who believes in the rule of law, but Wyatt ended the piece without so much as a quotation from a legal expert challenging Khuzami’s feeble rationale. Nowhere in Wyatt’s article was the suggestion that the SEC might escape its “quandary” by hiring more enforcement agents and being less secretive.
The Wall Street Journal also said the SEC faced a “quandary,” but it at least noted that some legal experts think the agency “had only itself to blame by failing to provide the judge with enough information to make a decision on the proposed settlement.”
Neither the NYT or the WSJ even hinted that the SEC might be, at the very least, shirking its duty and ought to be rebuilt from the ground up. As Rakoff wrote:
… In any case like this that touches on the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives, there is an overriding public interest in knowing the truth.