...
On Wednesday, the judge homed in on the issue of banks who settle with the S.E.C. and pledge to not violate the securities laws, yet repeatedly do so. Why then, Judge Rakoff asked, had the commission not brought any contempt charges against large financial firms in the past 10 years?

Mr. Martens, the S.E.C. lawyer, said that the agency felt that there were better and more appropriate ways to deal with chronic misconduct. The S.E.C. has said that striking settlements is often preferable to a costly and protracted lawsuit that it might lose.

Judge Rakoff called the contempt power — a judge’s ability to punish a party for disobeying a court order — “the backbone of the judiciary.” He questioned whether the S.E.C. was really serious about ever seeking an injunction against repeat offenders.

“It’s just for show,” Judge Rakoff said.

“We’re not saying that we will never use injunctive relief,” said the S.E.C. lawyer.

“Hope springs eternal,” the judge replied.
...

Aha, I see, this must all part of some sort of “dumb cop/dumber cop” routine designed to lull Wall Street into a false sense of security. Like they said...

“We’re not saying that we will never use injunctive relief”

Springeth Hope! Springeth!

Promises Made, and Remade, by Firms in S.E.C. Fraud Cases
By EDWARD WYATT
Published: November 7, 2011

WASHINGTON — When Citigroup agreed last month to pay $285 million to settle civil charges that it had defrauded customers during the housing bubble, the Securities and Exchange Commission wrested a typical pledge from the company: Citigroup would never violate one of the main antifraud provisions of the nation’s securities laws.

To an outsider, the vow may seem unusual. Citigroup, after all, was merely promising not to do something that the law already forbids. But that is the way the commission usually does business. It also was not the first time the firm was making that promise.

...
Barbara Roper, director of investor protection for the Consumer Federation of America, said, “You can look at the record and see that it clearly suggests this is not deterring repeat offenses. You have to at least raise the question if other alternatives might be more effective.”

S.E.C. officials say they allow these kinds of settlements because it is far less costly than taking deep-pocketed Wall Street firms to court and risking losing the case. By law, the commission can bring only civil cases. It has to turn to the Justice Department for criminal prosecutions.

Robert Khuzami, the S.E.C.’s enforcement director, said never-do-it again promises were a deterrent especially when there were repeated problems. In their private discussions, commissioners weigh a firm’s history with the S.E.C. before they settle on the amount of fines and penalties. “It’s a thumb on the scale,” Mr. Khuzami said. “No one here is disregarding the fact that there were prior violations or prior misconduct,” he said.
...

So precious: “never-do-it again promises were a deterrent especially when there were repeated problems”

I guess Mr. Khuzami would be in a position to know how these things work...
http://www.zerohedge.com/article/circle-jerk-101-secs-robert-khuzami-oversaw-deutsche-banks-cdo-has-recused-himself-db-relate

Circle Jerk 101: The SEC’s Robert Khuzami Oversaw Deutsche Bank’s CDO, Has Recused Himself Of DB-Related Matters

Submitted by Tyler Durden on 04/24/2010 13:08 –0400

The incest continues: the WSJ has informed that the SEC’s chief investigator, Robert Khuzami, used to be general counsel for Deutsche Bank, and presumably reviewed numerous CDO-related transaction, while on the “other side” of the wall. “As part of that job, he worked with lawyers who advised on the CDOs
issued by the German bank and how details about them should be disclosed to investors. The group included more than 100 lawyers who also defended the bank against lawsuits and vetted other financial products, these people said.” The good: he probably knows more about CDOs than any other person in government administration history, and thus would not have brought on the Goldman case without being aware of all the potential tripwire nuances (and yes, if the Goldman case gets to the discovery stage, which it will, it is game over for Goldman’s defense strategy, which means settlement and/or much worse). The bad: who knows how many Deustche Bank CDO’s of comparable or worse nature he allowed to see the light of day. The most interesting: “Because of Mr. Khuzami’s old job and his financial interest in the
company, he has recused himself from any matters related to Deutsche Bank, according to an SEC spokesman.” With Greg Lippmann’s (legendary head of CDO trading at the German firm whose assets are greater than all of Germany’s GDP) recent sudden departure, and the SEC being prevented from bringing CDO-related charges against the bank (for the time being), is DB currently actively cleaning up its tracks? After all the firm was one of the top 3 CDO issuers in the period under consideration.
....

Asset managers decry ‘purely political’ short-selling ban

William Hutchings
19 Oct 2011

Asset managers and brokers have reacted against the “purely political” imposition of a ban on naked shorting of European Union sovereign government bonds and stocks, which is expected to come into law following a late-night agreement between the European Parliament and representatives of EU member states.

Naked short-selling is carried out when an investor uses a credit default swap to make a bet against a financial product, such as sovereign bond, without holding the underlying asset itself.

Andrew Baker, chief executive of Alternative Investment Management Association, which represents the global hedge fund industry, said: “We have previously expressed our concerns about the impact of a ban on uncovered sovereign CDS.

“It could not only reduce liquidity and increase volatility in debt markets, but also increase government borrowing costs and reduce real economy investments in EU member states.”

...

Proxy hedging and market-makers are exempted from ban, the observer said.

Andrew Shrimpton, a partner of financial advisory firm Kinetic Partners and a former executive of the Financial Services Authority, also said the proposed ban will reduce liquidity in the CDS market, “leading to increased volatility of CDS prices, undermine confidence in member state sovereign bonds and make it more expensive for member states to finance budgets”.

He said: “This has been demonstrated by similarly ill-timed regulatory tightening such as the banning by France, Italy, Belgium and Spain of the short selling of financial stocks earlier this year, which undermined confidence in bank stocks, reduced liquidity in the banking system and eventually led to a taxpayer-funded bailout of Dexia.”
....
”

I love this rational: Banning naked short selling undermines confidence in stock, sending them plunging. Given how often market’s “confidence” is used to justify insane policies, I’m starting to think that it isn’t just regulatory reform we need. The “market” clearly needs a life coach to deal with this scary scary world. Fear not Mr. Market, there is hope!

It needs to be produced as a “Scrooge McDuck” cartoon with the bad guys in burglar’s masks, or black hats to make the point where in the transaction the conflict of interest arises. That’s if we want to penetrate the government trained minds of our fellows. And we must. There is power in numbers. Those without power cannot defend liberty, read honest courts.
Please keep on writing. Solid, clear style. Lucid.