Manhattan district court judge Jed S. Rakoff, speaking at an unknown location

Possibly as an aftereffect of his symbiosis with the Beard of Reason, federal district court judge Jed Rakoff has blocked a settlement between the SEC and Citibank on the grounds that he has no way of determining whether the agreement was “fair, reasonable, adequate and in the public interest.” The answers to his questions are define “fair,” not really and nope. At issue in the case is whether the banking giant committed fraud when it assembled a $1 billion mortgage fund from high-risk loans that it then sold to clients, even as it shorted* the fund in its own investments. The SEC alleges that Citibank failed to inform investors that the mortgages in the fund had been deliberately selected to fail. As it often does, the federal enforcement agency agreed to let Citibank settle the case without admitting or denying any fault. Judge Rakoff, however, does not play that.

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