It is not fair, because, despite Citigroup's nominal consent, the potential for abuse in imposing penalties on the basis of facts that are neither proven nor acknowledged patent. It is not adequate, because, in the absence of any facts, the Court lacks a framework for determining adequacy. And, most obviously, the proposed Consent Judgment does not serve the public interest, because it asks the Court to employ its power and assert its authority when it does not know the facts. An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts—cold, hard, solid facts, established either by admissions or by trials—it serves no lawful or moral purpose and is simply an engine of opposition.

In October, the judge ordered [text, PDF] the SEC and Citigroup to defend their recent settlement agreement [JURIST report]. The agreement concluded the dispute that charged Citigroup with having misled its investors about a $1 billion loan that defaulted. The result left investors to bear the burden while Citigroup reaped $160 million in profits from trading and fees. Rakoff directed both parties to answer nine questions pertaining to the $285 million settlement. One of Rakoff's principal issues is why the SEC imposed a $95 million penalty on Citigroup but imposed a $535 million penalty [settlement agreement, PDF] on Goldman Sachs in a July 2010 suit.