Bank Stocks Rise, Judge Rejects Citi Settlement

U.S. bank stock prices across the board opened strong and held gains all through Monday’s session boosted by statements out of Germany of fast-tracking treaty changes to allow the ECB greater latitude in providing support to Europe’s crumbling sovereign debt market.

The S&P 500 was up 2.9% to 1192.55.

Major U.S. banks like J. P Morgan Chase (NYSE: JPM) tracked with the index, up 2.4% to $29.16.  Citigroup (NYSE:C) was the big winner during trading up over 6% to $25.05 on solid volume but after-market news that U.S. District Judge Jed Rakoff in Manhattan had rejected a settlement with the SEC was not good news.

The $285 million settlement over a mortgage-backed security fund was rejected out of hand by Rakoff who was sharply critical of the SEC’s practice of allowing a settlement that neither confirms not denies liability.

Rakoff wrote in his opinion, “If the allegations of the complaint are true, this is a very good deal for Citigroup.  Even if they are untrue, it is a mild and modest cost of doing business.”  He also flatly rejected the argument by the SEC that he should defer to their judgment as to the proper course of action.

The SEC through it’s chief of enforcement, Robert Khuzami, responded that the decision does not take into account the opportunity costs and risks associated with going to trial.

But Rakoff believes that cases like this demand that the truth become known as it is in the public interest.  The proposed settlement is “neither fair, nor reasonable, nor adequate, nor in the public interest,” he said.  This is not his first tangle with the SEC and their handling of banking irregularities.

Previous Post »  
Tags: , , , , , ,
Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

Comments are closed.