September 17, 2009
Judge Rakoff and the Merrill BofA Circus
Posted by David Zaring

I feel a little lonely being one of almost no observers I've read critiquing Judge Rakoff for his one man crusade against....something.  Matt Bodie says that it represents a challenge to the entire SEC system of enforcement - and though he thinks that is a good thing, he's probably right.  Here's their enforcement action against GE for accounting regularities, no individual responsibility taken, here's their report last year on major enforcement actions and fines imposed - note how many don't come with an admission of individual responsibility ... but surely, in the Rakoff regime, they'd have to get names named.

Anyway, here's a good overview from Clusterstock, here's Pearlstein/WaPo with Rakoff huzzahs, and here's the news - you knew it would happen, given the profile of the matter - that Andrew Cuomo is trying to get involved.  There's a lot of moving parts here, including a merger that the government thought was necessary to save the financial system, and this case means that one judge is trying to undo an agreement by sophisticated parties taking all of that into account.

Call me an apologist.  Or call me a fan of free will - here, the free will of the parties to settle their disputes on their own terms.  And, even though you can get way too involved in the "find the pea" shell game of whose responsibility this is, if you don't like the fines that the SEC imposes on regulated industry, perhaps you ought to bring your complaint to the SEC, rather than relying on a judge who, despite some SEC experience, isn't really revealing a lot of familiarity with what the agency does many times a year.

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