President Obama on Tuesday said he wants harsher penalties for financial institutions that commit securities fraud.
In a speech in Osawatomie, Kansas, Obama pitched the need to fully implement Dodd-Frank Act reforms and to extend the payroll tax cut for the middle-class. Republicans in Congress continue to press for changes to certain rules and a restructuring of the Consumer Financial Protection Bureau.
President Obama on Tuesday said he wants harsher penalties for financial institutions that commit securities fraud.
In a speech in Osawatomie, Kansas, Obama pitched the need to fully implement Dodd-Frank Act reforms and to extend the payroll tax cut for the middle-class. Republicans in Congress continue to press for changes to certain rules and a restructuring of the Consumer Financial Protection Bureau.
Buried in his speech, Obama echoed a phrase from U.S. District Court Judge Jed Rakoff when he struck down a proposed settlement between the Securities and Exchange Commission and Citigroup (C) in November. Rakoff thought the $285 million settlement was too low for investors allegedly defrauded on a $1 billion collateralized debt obligation tied to mortgages.
Investors lost more than $700 million on the deal, while Citi profited $160 million.
“If the allegations of the complaint are true,” Rakoff said in his ruling, “this is a very good deal for Citigroup; and, even if they are untrue, it is a mild and modest cost of doing business.”
“Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender,” Obama said Tuesday. “No more. I’ll be calling for legislation that makes these penalties count – so that firms don’t see punishment for breaking the law as just the price of doing business.”
Such legislation may come as an amendment to the current securities law. Robert Khuzami, director of division of enforcement at the SEC, said in response to the Rakoff ruling, the Citi penalty had to be based on what the defendant profited from the deal.
Write to Jon Prior.
Follow him on Twitter @JonAPrior.
