Starve the Beast and a Slap on the Wrist

Help Me Help Myself - No Banker Left Behind - photo by A. Golden

On Monday a federal judge blocked a $285 million settlement between the Securities and Exchange Commission and Citigroup. Apparently it has become common practice for the SEC to settle with large financial institutions, allowing them to pay relatively small fines and admit no guilt. These settlements require the approval of a federal judge.

How does a small fine and no admission of guilt prevent Citigroup or any other financial institution from breaking the law in the future? Clearly it does not.

The SEC contends that Citigroup committed fraud when they deceived investors into thinking the securities they were buying were selected by an independent party when in fact they were not. The securities were actually chosen by Citigroup because they believed they were failures. This allowed Citigroup to bet against those securities and in turn their customers.

Federal judge, Jed S. Rakoff, cited that it was the SEC’s duty “to see that the truth emerges”. Judge Rakoff made it clear that a $285 million settlement is not much of a deterrent for large financial institutions saying it is “pocket change” and considered by these firms as “a cost of doing business”.

And that is the problem.

The SEC says it does not have the manpower or the money to take on big Wall Street firms and that is why they choose to go the route of settlement. The SEC feels it does not have the means to take cases to trial against deep-pocketed firms. Does this sound like big government to you? It certainly doesn’t to me. It sounds like the results of the “starve the beast” mentality embraced by the Right. They advocate less regulation, small government and trickle down economic policy as the solution to any and all financial problems. The reality is this ideology has resulted in many of the financial problems of the past 3 decades, especially the 2008 meltdown.

We can’t get the government we need when we have a Democratic president (and for a time a Democratic congress). What awaits us if we soon get a Republican president who would likely advocate even less regulation and more tax breaks for the rich and powerful?

What planet do Republicans live on? Do they simply ignore the evidence that contradicts their ideology?

We should find it unacceptable in this country for a financial institution to essentially write-off the fraud it commits as a cost of doing business because the agency in charge of regulating it lacks teeth – or worse – is complicit.


#big government#Citigroup#Democratic#Republican#SEC#Securities and Exchange Commission#trickle down#wall street