Consent of the Regulated

Judge Rakoff's opinion in SEC v. Citigroup, rejecting a negotiated settlement proposed by government and bank, rounds out what is now becoming a mainstream or conventional understanding of what has happened to our federal government. In the perversion of representative democracy where legislation is purchased and where money is speech, it makes sense that those charged with enforcing law will back down when it comes to the conduct of large corporations.

John Cassidy in The New Yorker draws a link between the proposed Citigroup settlement, now rejected by Judge Rakoff, and regulatory capture:

"The head of enforcement at the S.E.C., Robert Khuzami, released a lengthy statement saying Judge Rakoff’s judgement 'ignores decades of established practice throughout federal agencies and decisions of the federal courts.' That may well be true, but that only raises larger questions about the cozy relationship between Wall Street and its primary regulator. Khuzami is, by all accounts, a tough and able lawyer, who earlier in his career worked for more than a decade in the office of the U.S. Attorney for the Southern District of New York. But he subsequently spent seven years in a highly remunerated position at Deutsche Bank, one of the firms that the S.E.C. is now investigating. After that experience, Khuzami would hardly be human if he hadn’t come to view the world at least partly through the lens of Wall Street."

Analysis all too plausible in light of what #occupy is teaching us.

Below, in part, is the Judge's reasoning. His rhetoric is stirring because he is talking about nothing less than the Executive's abandonment of constitutional responsibilities, and the responsibility of the Judicial branch of government to not be complicit in the banana-republicanizing of the nation.

“[T]he proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest. Most fundamentally, this is because it does not provide the Court with a sufficient evidentiary basis to know whether the requested relief is justified . . . . Purely private parties can settle a case without ever agreeing on the facts, for all that is requires is that a plaintiff dismiss his complaint. But when a public agency asks a court to be come its partner in enforcement by imposing wide-ranging injunctive remedies on a defendant, enforced by the formidable judicial power of contempt, the court, and the public, need some knowledge of what the underlying facts are: for otherwise, the court becomes a mere handmaiden to a settlement privately negotiated on the basis of unknown facts, while the public is deprived of ever knowing the truth in a matter of obvious public importance. . . .

"As for common experience, a consent judgment that does not involve any admissions and that results in only very modest penalties is just as frequently viewed, particularly in the business community, as a cost of doing business imposed by having to maintain a working relationship with a regulatory agency, rather than as any indication of where the real truth lies. This, indeed, is Citigroup' s position in this very case. . . .

"An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free-roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts - cold, hard, solid facts, established by admissions or by trials - it serves no lawful or moral purpose and is simply an engine of oppression. . . . 

"In much of the world, propaganda reigns, and truth is confined to secretive, fearful whispers. Even in our nation, apologists for suppressing or obscuring the truth my always be found. But the S.E.C., of all agencies, has a duty inherent in its statutory mission, to see that the truth emerges; and if it fails to do so, this Court must not, in the name of deference or convenience, grant judicial enforcement to the agency's contrivances."

Where is President Obama? Why isn't he applauding the Judge's ruling and promising to get the Executive Branch's act together? Why does he refuse to use his office to govern?

Scny screenshot

Screenshot is of the website for the US District Court on which Judge Rakoff sits. It's powerful stuff, that rulings like this are published and disseminated for free. You can't say this about all judicial opinions, but non-lawyers can certainly read and understand all of Judge Rakoff's ruling.


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