Citibank

Fed Audit-- Liveblog on Data Dig

Zach Carter — Wed, 01 Dec 2010 12:23:17 -0500

Just starting to parse through the Fed audit data. Looks like the Primary Dealer Credit Facility is predominantly a bailout for Citigroup and Bank of America. More to come . . .

UPDATE:

Looks like in the early days the Primary Dealer Credit Facility was almost exclusively used by Bear Stearns, Countrywide, Barclays and Cantor Fitzgerald. At this point, Bear and Countrywide were JPMorgan Chase and Bank of America, respectively. From April 16, 2008 through July 30, 2008, these four firms were the only ones to access the PDCF, and they did it every day the facility was open.

UPDATE 2:

Until September 15, 2008, the collateral accepted by the Fed at the Primary Dealer Credit Facility remained relatively robust, in terms of credit ratings.

On September 15, as Lehman Brothers and everything else hit the fan, the Fed began accepting total garbage as collateral. Including CCC-rated (beyond junk bond status) collateral from JPMorgan Chase, Citigroup, Lehman Brothers, Goldman Sachs and Morgan Stanley.

UPDATE 3:

The Fed accepted CCC-or-lower collateral under the Primary Dealer Credit Facility from September 15, 2008 until May 12, 2009. A total of $490.9576 billion in such collateral was accepted. That's billion, with a "b." And you thought TARP was a bailout.

UPDATE 4:

The Fed began accepting a wide variety of junk bonds-- securities rated BB and below-- as collateral beginning September 15, 2008. Totals to come.

UPDATE 5:

The Fed accepted a total of $1.31 trillion in junk-rated collateral between Sept. 15, 2008 and May 12, 2009 through the Primary Dealer Credit Facility. TARP was nothing compared to this.

UPDATE 6:

Anyone suggesting that the Fed's "emergency lending" facilities are just part of macro or monetary policy is kidding themselves. The Fed refused to accept junk-rated collateral until Sept. 15, 2008. When it became clear that Lehman was going off the rails, they started accepting junk-rated collateral-- even from Lehman Brothers itself!

That makes it very clear that the Fed was bailing out these firms in the midst of a crisis. They made a conscious decision to lower their lending standards in order to save big Wall Street firms with no strings attached.

UPDATE 7:

From ~~February 24, 2009~~ March 4, 2009 through May 12, 2009, Citigroup and Bank of America were the sole companies to borrow through the Fed's Primary Dealer Credit Facility, and they used it every single day. A total of 16 firms were eligible for the facility.

UPDATE 8:

This Fed Audit data should shame all of the conventional-wisdom Democrats out there declaring TARP a success because of the recent CBO score. To put it mildly, these folks are totally missing the point. TARP was a "success" in large part because of the Fed's no-strings-attached efforts. And we now know that the Fed was willing to accept junk-- literally junk bonds-- as collateral for its no-strings-attached loans.

TARP and the stress tests only "worked" insofar as they convinced banks that the government would shoulder infinite future losses from the banking sector. We're now paying the price for that commitment in the form of massive foreclosure fraud, in which untold numbers of borrowers are being improperly kicked out of their homes in the name of bank profits.

TARP failed. Its losses are so low because the Fed stood behind the banks, allowing them to play one arm of the government against the other. Even if we had "turned a profit" on TARP at its formal interest rate without Fed malfeasance, look what we got in return. In the Depression, FDR secured massive national foreclosure relief and still turned a profit. Today, we have a predatory program called HAM

UPDATE 9:

When crisis goes nova in Sept. 2008, two Merrill Lynch facilities start borrowing everything they can from the Fed. They're called "Merrill Lynch Government Securities Inc." and "Merrill Lynch Government Securities Inc. -- London"

So far as I can tell, the distinction between London and the U.S. is just an excuse for Merrill to take double advantage of the Fed's bailout facilities. Both borrow every single day once the crisis sets in, and both pledge loads of junk bonds as collateral.

UPDATE 3:30

Goldman Sachs also used foreign subsidiaries to double-down on Fed bailout facilities. Just like Merrill, they hae a U.S. unit taking out loans, and a London unit.

UPDATE 3:45

Morgan Stanley also opened a London subsidiary to double-down on Fed bailout facilities, although it appears they caught onto the scam later than Goldman and Merrill.

UPDATE 3:51

Nope, my mistake. Morgan, Merrill and Goldman all came to the foreign sub conclusion at about the same time. Morgan Stanley and Goldman Sachs began simultaneously begging from the Fed from New York and London on Sept. 22, 2008, while Merrill Lynch got the idea on Sept. 23, 2008.

4:10

Moderately funny. Citigroup, home of Clinton Treasury Secretary Robert Rubin, didn't figure out the foreign subsidiary scam until Nov. 24, 2008, a month after its competitors.

4:17

By Nov. 28, 2008, only Citi, BofA/Merrill and Morgan Stanley/Mizuho were accessing the Fed's Primary Dealer Credit Facility. By March 4, Morgan/Mizuho had bowed out, and the bailout program was used exclusively by Citi and BofA.

4:50

BofA and its predecessors Countrywide and Merrill Lynch accessed the Fed's Primary Dealer Credit Facility 416 times, for a total of $2.783 trillion. A full $476 billion in junk bonds were pledged as collateral for the loans, or roughly 17 percent. The PDCF is an overnight facility, so a lot of these loans are simply being rolled over day-to-day. Nevertheless, it's a staggering amount of money, with an enormous degree of totally worthless collateral being pledged to justify it.

The Fed and Treasury had to do something in 2008 to keep the financial system from falling off a cliff. But by treating the problem as a liquidity issue with no strings attached, they didn't solve the underlying problem: lots of very big banks were simply insolvent.

Now, over two years after TARP, it's clear that many of our largest banks are only "solvent" due to accounting irregularities being approved by regulators that are terrified of letting big banks go under. As a result of this fear, we aren't really regulating our banks.

So Paul Krugman's prediction of zombie banks creating a drag on the economy has not come true. The reality is, in fact, much worse. Krugman foresaw zombie banks that didn't lend due to capital concerns, preventing the recovery from getting off the ground. We're seeing plenty of that, but we're also seeing zombie banks actively prey on the economy through the foreclosure process in an effort to repair their balance sheets. The zombie banks aren't just failing to boost the economy, they're actively sabotaging it.

I need to eat.

9:30

Mike Konczal deserves a citation here. Everything I said above about liquidity vs. solvency comes straight out of his financial analysis playbook.

Handcuffs For Wall Street, Not Happy-Talk

Zach Carter — Sun, 12 Sep 2010 14:48:23 -0400

The Washington Post has published a very silly op-ed by Chrystia Freeland accusing President Barack Obama of unfairly "demonizing" Wall Street. Freeland wants to see Obama tone down his rhetoric and play nice with executives in pursuit of a harmonious economic recovery. The trouble is, Obama hasn't actually deployed harsh words against Wall Street. What's more, in order to avoid being characterized as "anti-business," the Obama administration has refused to mete out serious punishment for outright financial fraud. Complaining about nouns and adjectives is a little ridiculous when handcuffs and prison sentences are in order.

Freeland is a long-time business editor at Reuters and the Financial Times, and the story she spins about the financial crisis comes across as very reasonable. It's also completely inaccurate. Here's the key line:

"Stricter regulation of financial services is necessary not because American bankers were bad, but because the rules governing them were."

Bank regulations were lousy, of course. But Wall Street spent decades lobbying hard for those rules, and screamed bloody murder when Obama had the audacity to tweak them. More importantly, the financial crisis was not only the result of bad rules. It was the result of bad rules and rampant, straightforward fraud, something a seasoned business editor like Freeland ought to know. Seeking economic harmony with criminals seems like a pretty poor foundation for an economic recovery.

The FBI was warning about an "epidemic" of mortgage fraud as early as 2004. Mortgage fraud is typically perpetrated by lenders, not borrowers—80 percent of the time, according to the FBI. Banks made a lot of quick bucks over the past decade by illegally conning borrowers. Then bankers who knew these loans were fraudulent still packaged them into securities and sold them to investors without disclosing that fraud. They lied to their own shareholders about how many bad loans were on their books, and lied to them about the bonuses that were derived from the entire scheme. When you do these things, you are stealing lots of money from innocent people, and you are, in fact, behaving badly (to put it mildly).

The fraud allegations that have emerged over the past year are not restricted to a few bad apples at shady companies-- they involve some of the largest players in global finance. Washington Mutual executives knew their company was issuing fraudulent loans, and securitized them anyway without stopping the influx of fraud in the lending pipeline. Wachovia is settling charges that it illegally laundered $380 billion in drug money in order to maintain access to liquidity. Barclays is accused of illegally laundering money from Iran, Sudan and other nations, jumping through elaborate technical hoops to conceal the source of their funds. Goldman Sachs set up its own clients to fail and bragged about their "shitty deals." Citibank executives deceived their shareholders about the extent of their subprime mortgage holdings. Bank of America executives concealed heavy losses from the Merrill Lynch merger, and then lied to their shareholders about the massive bonuses they were paying out. IndyMac Bank and at least five other banks cooked their books by backdating capital injections.

For the past decade, fraud has been a mainstream business on Wall Street. That's to be expected—massive financial crashes simply do not occur without widespread fraud. After the savings and loan crisis, more than 1,000 bankers went to jail for fraud, and the S&L bust was a much smaller debacle than the frenzy that took down Wall Street in 2008.

This is not to suggest that everyone on Wall Street is a criminal—many of these frauds were committed against reasonable financial professionals. But the only reason we haven't we seen throngs of financiers in handcuffs over the past two years is precisely because Obama has been listening to people like Freeland, trying to avoid "demonizing" bankers who broke the law. Obama critics like hedge fund manager Daniel Loeb have been calling him "anti-business" precisely because some fraud charges have surfaced in the past two years-- even though his agencies have gone easy on the fraudsters themselves.

The regulators Obama kept on board at the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC) have not recommended any fraud prosecutions to the Justice Department—and we know that the OTS itself was involved in the illegal backdating scheme at IndyMac and other banks. The SEC has not pursued civil fraud cases against some of the executives it believes were involved in Citibank's subprime scam, nor is the agency seeking serious accountability for Barclays. Nothing has happened to Lehman Brothers or Bank of America for their Enron-style derivatives scams that hid debt from investors, or to Merrill Lynch for its self-dealing of subprime derivatives. The Justice Department is letting Wachovia off the hook for laundering drug money. Let me repeat that: the Obama administration has been so eager to please Wall Street that it is letting bankers get away with laundering drug money.

Applying the law equally to all citizens isn't demonization and it isn't socialism-- it's a basic proponent of justice. When you steal a lot of money, you go to jail. When your theft crashes the global economy and throws 8 million people out of work, you go to jail for a long time. Obama doesn't just need tough talk for Wall Street, he needs to prosecute the frauds that were committed, and explain them to the American people. Nothing about this should be threatening to the millions of fair and reasonable American financial professionals who have done nothing wrong.

If you examine Freeland's two examples of so-called "demonization," her story simply becomes absurd. When hedge funds who owned Chrysler bonds complained about losing money in the Chrysler bankruptcy, Obama called them "speculators" who needed to take losses. That's perfectly reasonable. They were speculators, and they speculated on a company that went bankrupt. When you invest in a bad company, you lose money. That's how capitalism works.

Freeland also claims that Obama was "out of line in permitting the denunciation of Goldman Sachs." Goldman deserved to be denounced-- their ABACUS scam was abhorrent, and it wasn't the only egregious act the company engaged in (see: "shitty deal"). But Obama has had plenty of nice things to say about Goldman. He defended the massive bonus that Goldman CEO Lloyd Blankfein paid himself, and praised Blankfein as a "savvy" fellow.

You cannot reason with someone who claims he is being demonized when you call him "savvy," nor should you. Any president who neglects basic principles of justice and standards for economic security in order to pamper princely executives isn't doing his job. Ethical financiers and reasonable business editors should have nothing to fear from a president who criticizes and prosecutes illegal finance.

Citibank: Will Anyone Hold Rubin And Prince Accountable?

Zach Carter — Thu, 09 Sep 2010 08:22:12 -0400

Former Citibank Chairman Robert Rubin knew about mounting subprime mortgage losses at his company, but still allowed executives to mislead to Citibank's shareholders about those losses, according to the SEC. But that same agency wants to let Rubin off the hook for an offense that has sent others to jail, and which contributed directly to Citi's epic taxpayer-funded bailout.

Those subprime losses were no small matter. Citi told its shareholders it had $13 billion in subprime exposure, when the actual figure was almost $40 billion higher. As the financial crisis deepened, Citi's heavy involvement in the subprime business nearly destroyed the bank, propelling it into one of the ugliest bailouts of 2008. The new revelations about the depth of Rubin's involvement in Citi's subprime scam come from a damning court filing the SEC turned over on September 7, at the request of Federal Judge Ellen Huvelle, and reported by Joshua Gallu and William McQuillen for Bloomberg News. The SEC has been dragging its feet and pulling its punches on the Citi case, which appears to be one of the most straightforward examples of Wall Street fraud from the crash of 2008. The agency is still trying to prevent fraud charges from being filed against either Citi CEO Chuck Prince or Rubin, who served as Treasury Secretary under President Bill Clinton before raking in more than $120 million at Citi.

According to court documents, the SEC believes that all of Citi's top officials knew exactly what was going on with the bank's subprime accounting, and knew that the official line being fed to the public was bunk. Lying to your shareholders is a big, straightforward no-no in Corporate America—it's considered securities fraud, subject to both hefty fines and jail time.

Thanks to the corporate reform laws Congress passed after the Enron debacle, every top executive at every significant U.S. corporation has to personally verify every accounting statement his or her corporation issues. That signature means that the executive is personally liable for the accuracy of those statements, and subject to criminal prosecution for egregious inaccuracies. But while the SEC has been forced to acknowledge that it believes every top official at Citi knew about the subprime scam, it is only seeking a slap on the wrist against two officials: CFO Gary Crittenden and former investor relations chief Arthur Tildsley.

Under a settlement proposed by the SEC, Crittenden faces the steepest penalty at $100,000. But in 2007 alone, the year the alleged impropriety took place, Crittenden took home $19.4 million. The fine amounts to about half of one percent of his income in a single year, a rounding error on a bonus.

In addition to ignoring big fish like Rubin, the SEC actually wants to fine Citi shareholders $75 million for having the audacity to be lied to. The agency probably wouldn't even be going after the case at all if it weren't for the efforts of the Financial Crisis Inquiry Commission, which publicly revealed the scandal in an April 7 hearing (see page 368 of this pdf transcript).

Rubin's involvement with Citi has always reeked of impropriety. Back when Rubin was still running the Treasury Department, he convinced Congress and President Clinton to sign-off on the Gramm-Leach-Bliley Act, which repealed decades of Wall Street regulation. The bill allowed ordinary, boring banks to get into high-flying Wall Street securities trading, and was directly lobbied for by Citibank, which needed the legislation in order to go through with a key merger. Once the bill was passed, Ruin left Treasury for Citi, where he made $120 million before departing in disgrace after the crash.

After AIG, Citi was the top recipient of Wall Street welfare. The bank needed $45 billion in direct bailout funds, plus hundreds of billions in taxpayer guarantees against losses. The company was run like an insane hedge fund, taking on outrageous amounts of risk, and not even bothering to insure itself against it like its Wall Street peers. AIG went under because it was insuring crazy risks from other Wall Street banks, but Citi didn't even bother to seek protection for its insanity.

The SEC's job is to pursue securities fraud and help prosecutors with criminal cases against white-collar criminals. While the agency has made a handful of important cases against smaller hedge funds, it has found excuses from high-profile bankers mysteriously convincing. It has not pushed for criminal charges against any Citi executive, nor has it seriously pursued significant civil charges against Bank of America executives who lied about bonuses, or Barclays executives who laundered money from Iran.

It's conceivable (though unlikely) that Robert Rubin and Chuck Prince really didn't understand what was going on. In his testimony before the FCIC, Rubin emphasized that subprime securities were rated AAA by rating agencies, and claimed he didn't expect losses to get so out-of-control. Maybe he really, truly failed to understand what he'd allowed his bank to get into. If that's really true, then he was failing to demand detailed reports or research on the most critical issue facing his bank in 2007, an issue which would have bankrupted the company without a monstrous government bailout. And both Rubin and Prince were getting paid like kings for this idiocy, helping to destroy the economy in the process.

Since the Reagan years, the SEC has been systematically starved for funding. Its enforcement regime has been intentionally gutted, and the entire economy paid the price for that effort with the financial crash of 2008 and the worst recession since the Great Depression. When bankers think they can get away with rampant fraud and get paid very well to do it, they'll do it. Rubin's best defense is that he really isn't all that bright—he's either an idiot or a criminal. Without high-profile investigations into top-line officials like Rubin, we can expect this same pattern of stupidity or criminal fraud to continue-- with more financial crashes, more job losses, and bigger bonuses. The Wall Street crash wasn't the result of a few bad apples going rogue-- top-level executives systematically pursued businesses that wrecked the economy. It's time to break the cycle, and the SEC has the power to do it.

Starving The SEC Won't Fix Wall Street

Zach Carter — Tue, 31 Aug 2010 12:44:31 -0400

Ezra Klein has a pretty silly post up about the Wall Street regulation bill and the SEC's funding. He argues that since the SEC failed miserably in the years leading up to the crisis, it's absurd to see them getting more funding in its aftermath. Like bloated banks, Ezra says, bloated regulators are just getting bigger, even after Congress passed its Wall Street overhaul. It's not a good argument.

Ezra is unquestionably correct to note that the SEC failed miserably during the Bush years. And there should be no question that the agency's failures were far beyond mere budgetary inadequacies. You can't blame the Madoff missteps—which were repeatedly brought to the agency's attention by whistleblowers, only to be ignored—on insufficient funding. On Madoff, at least, the SEC was slapped in the face with egregious fraud, and failed to do anything about it. The SEC's leadership spent years implementing a hands-off approach to regulation and enforcement, and the Madoff scandal was a direct result.

I'd actually go further in criticizing the agency than Ezra does (at least in his post). It's not just that it failed miserably in the years leading up to the crisis—it's still getting things wrong now. The SEC has ended some high-profile abuses, but it isn't coming down very hard on the people it accuses of malfeasance. The Goldman Sachs settlement was pathetically small for a case that could have sunk the entire firm. The action against Barclays for illegally laundering money from Iran basically lets the bank off the hook. Bank of America executives who lied to their shareholders about their bonuses went unpunished. The proposed settlement with Citibank over its $40 billion lie on its subprime exposure is an absolute disgrace.

But complaining that the SEC is getting some bloated new budget is still totally wrong-headed. The SEC's job is to police all of corporate America for financial fraud. The supposedly outrageous new budget that the agency will receive next year is . . . wait for it . . . $1.2 billion. That's roughly 6 percent of the 2009 bonus pool for financiers who work in New York City alone.

During the Bush years, SEC Chairman Christopher Cox systematically curtailed the SEC's budget in order to prevent regulatory enforcement and fraud prosecution. The agency's budget was virtually unchanged from 2004 through 2009, despite an explosion in the size and scope of Wall Street's activities over that time-frame. Cox was also straightforwardly incompetent and irresponsible—he refused to take part in the Bear Stearns bailout negotiations because he didn't want to leave a birthday party.

The problem is not that the SEC is so bloated it can't get anything done. The problem is that political appointees at the agency are making decisions that are very bad for the economy thanks to political motivations. If we want the basic functions of law enforcement to be fulfilled, we have to put cops on the beat. The $1.2 billion budget for next year is 20 percent higher than last year's budget, and it will go toward putting more rank-and-file regulators to work looking for fraud and abuse. Does anybody really want to see fewer cops on the beat after what happened in 2008?

When a regulatory agency is starved for funding and lead by an astonishingly inept laissez-faire ideologue, the result is going to be failure. That doesn't mean that a better-funded agency with different leadership can't get something right. Reasonable funding alone won't solve things—people at the top still have to make good decisions. But securing decent funding levels is still a necessary step. The alternative, which Ezra appears to be backing, is regulatory nihilism in which failures committed by people who don't believe the government can ever do anything right prove that the government can never do anything right.

That's not to say that regulators alone should be relied on to protect the economy from financial calamity. Empowering regulators is a necessary step for economic security, not a sufficient one. We also have to structure markets so that epic frauds and financial calamities are much more difficult to create. That means breaking up the big banks, enacting hard, Congressionally-binding caps on leverage and creating strong barriers against the types of financial business that different firms can engage in (Glass-Steagall, or something like it).

Congress failed to adopt any of these serious structural reforms with its Wall Street overhaul, instead taking the Obama administration's advice and simply granting regulators broader powers to cope with trouble when it arises. That's not going to work. But continuing to starve the SEC isn't going to improve things either.

Will Anyone Be Punished For Citibank's $40 Billion Subprime Lie?

Zach Carter — Tue, 17 Aug 2010 16:05:08 -0400

Finally, some good news on Wall Street accountability. A federal judge is holding up the SEC's effort to let Citigroup's top executives off the hook for misleading their own shareholders about $40 billion in subprime debt.

If Citi executives did what the SEC says they did, then the company's top managers are guilty of both civil and criminal fraud. But regulator isn't even going after some of the executives, while letting others off with a penalty that amounts to a rounding error on their bonuses. The proposed settlement is a stunning and shameful declaration of deference to the nation's top financiers, a literal get-out-of-jail free card for bankers who not only wrecked the economy, but—according to SEC allegations—broke the law to do it.

In 2007, when investors all over the world were justifiably freaking out about subprime mortgages, Citi executives bragged about their relatively limited exposure to the crisis: Everything was going to be fine, because Citi had only $13 billion in subprime holding! It was true—Citi did have $13 billion in subprime mortgages. The trouble was, Citi also had about $40 billion more in subprime mortgage exposure included in mortgage-backed securities and other fancy financial instruments. And according to the SEC, top management at Citi knew about the extra $40 billion in subprime holdings (it's not like it got lost in the couch cushions), and went around parading the $13 billion figure anyway.

Lying to your shareholders about the most pressing business issue of the decade is an one of the worst things a business executive can do. It's also a crime, one for which all of Citi's top officers can be implicated—again, if the allegations are true—thanks to the Sarbanes-Oxley Act, the landmark corporate reform law that Congress passed after the Enron and WorldCom scandals. That law required the top executives of every major corporation to personally sign-off on their company's accounting statements. If anything false is in there, or anything important is left out, then these managers are personally accountable, by law.

But after compiling their evidence, the SEC decided to let Citi's top brass off the hook. They aren't even pursuing a case against then-CEO Chuck Prince. The stiffest penalty is being handed out to then-Chief Financial Officer Gary Crittenden, who will pay a mere $100,000 to settle allegations that people can go to prison for. And worst of all, the SEC hasn't even recommended that prosecutors or the Justice Department pursue a criminal case against the Citi execs. Prosecutors do have the authority to go after frauds like this without the SEC's help, but in practice, that generally proves very difficult. Regulators are accustomed to going over bank balance sheets and reviewing corporate statements—prosecutors aren't usually quite so specialized.

Fortunately, federal Judge Ellen Segal Huvelle isn't quite convinced that the Citi settlement makes any sense. She's refusing to sign-off on the deal without further documentation—an uncommon step in regulatory settlements. And, of course, the Citi settlement doesn't make any sense at all. Crittenden, for instance, took home $19.4 billion in 2007 alone. The SEC's fine amounts to one-half of one percent of his income in the year he allegedly ripped off his own shareholders.

But the settlement actually gets worse. The SEC is also fining Citigroup itself $75 million. This fine is paid by Citi's shareholders. In many corporate abuses, shareholders should be punished—if shareholders benefitted from the scam, they should take the hit when the authorities show up. But this particular abuse was committed by Citi's executives against Citi's shareholders. The shareholders were lied to, and now the SEC wants shareholders to pay for being lied to.

This isn't the first time the SEC has done something this silly. When the agency went after Bank of America earlier this year for lying to its shareholders about billions of dollars in bailout bonuses, the SEC's strategy was to let the executives off the hook, and fine shareholders for $33 million. It was crazy, and federal judge Jed Rakoff refused to approve the deal for months (Rakoff ultimately approved a revised settlement, but scolded the SEC for hurting shareholders instead of holding executives accountable).

When the SEC does get the right targets, it tends to go easy on them, at least, when the targets are major banks. After compiling a damning case against Goldman Sachs, the SEC let the firm go with a $550 million fine. Winning a court case would have sunk the company, but $550 million? As a regulator from another agency put it to me in conversation, "For Goldman, that's a Tuesday."

These types of decisions are political. Rank-and-file regulators build cases by digging through documents, but political appointees decide whether to settle with firms, and on what terms. During the savings and loan crisis, more than 1,100 bankers went to jail for fraud. But for some reason, the top brass at today's SEC seems to think that it's very important to bring these cases against companies, so long as the perpetrators get to walk away. Let's be clear. If the SEC actually believes in the charges it brought against Citi executives, it should be working with prosecutors to pursue a criminal case. In civil court, Judge Huvelle should be demanding much more substantive penalties than a rounding error on a bonus.

Laws and regulations are only as good as the regulators who enforce them. Sarbanes-Oxley was the government's entire response to Enron and WorldComm scandals—if landmark corporate accountability laws simply do not apply to major banks, what hope is there for the Wall Street overhaul Congress just passed?