Last November, U.S. District Judge Jed Rakoff rejected the proposed $285 million settlement between the Securities and Exchange Commission and Citigroup related to allegations of improper tactics by Citigroup on the sale of mortgage-backed securities. There were many parts of the proposed settlement that failed to meet Judge Rakoff's approval, including the fact that the SEC settled the case without requiring Citigroup to admit or deny liability. Another factor, however, was the fact that Judge Rakoff deemed the penalty portion of the settlement—$95 million—to be mere “pocket change” to Citigroup.
Judge Rakoff pointed out that Citigroup had made $160 million in ...