I have to say, this story really cheered me up. Holding Wall Street accountable? Making them admit what they did? What a novel idea. Judge Rakoff is going to make a lot of fans with this ruling:

WASHINGTON — Taking a broad swipe at the Securities and Exchange Commission’s practice of allowing companies to settle cases without admitting that they had done anything wrong, a federal judge on Monday rejected a $285 million settlement between Citigroup and the agency.

The judge, Jed S. Rakoff of United States District Court in Manhattan, said that he could not determine whether the agency’s settlement with Citigroup was “fair, reasonable, adequate and in the public interest,” as required by law, because the agency had claimed, but had not proved, that Citigroup committed fraud.

As it has in recent cases involving Bank of America, JPMorgan Chase, UBS and others, the agency proposed to settle the case by levying a fine on Citigroup and allowing it to neither admit nor deny the agency’s findings. Such settlements require approval by a federal judge.

While other judges are not obligated to follow Judge Rakoff’s opinion, the 15-page ruling could severely undermine the agency’s enforcement efforts if it eventually blocks the agency from settling cases in which the defendant does not admit the charges.

The agency contends that it must settle most of the cases it brings because it does not have the money or the staff to battle deep-pocketed Wall Street firms in court. Wall Street firms will rarely admit wrongdoing, the agency says, because that can be used against them in investor lawsuits.

The agency in particular, Judge Rakoff argued, “has a duty, inherent in its statutory mission, to see that the truth emerges.” But it is difficult to tell what the agency is getting from this settlement “other than a quick headline.” Even a $285 million settlement, he said, “is pocket change to any entity as large as Citigroup,” and often viewed by Wall Street firms “as a cost of doing business.”

Now why doesn't President Obama nominate more judges like this one?

As President Obama traveled to Wall Street on Monday and chided bankers for their recklessness, across town a federal judge issued a far sharper rebuke, not just for some of the financiers but for their regulators in Washington as well.

Giving voice to the anger and frustration of many ordinary Americans, Judge Jed S. Rakoff issued a scathing ruling on one of the watershed moments of the financial crisis: the star-crossed takeover of Merrill Lynch by the now-struggling Bank of America.

Judge Rakoff refused to approve a $33 million deal that would have settled a lawsuit filed by the Securities and Exchange Commission against the Bank of America. The lawsuit alleged that the bank failed to adequately disclose the bonuses that were paid by Merrill before the merger, which was completed in January at regulators’ behest as Merrill foundered.

He accused the S.E.C. of failing in its role as Wall Street’s top cop by going too easy on one of the biggest banks it regulates. And he accused executives of the Bank of America of failing to take responsibility for actions that blindsided its shareholders and the taxpayers who bailed out the bank at the height of the crisis.

The sharply worded ruling, which invoked justice and morality, seemed to speak not only to the controversial deal, but also to the anger across the nation over the excesses that led to the financial crisis, and the lax regulation in Washington that permitted those excesses to flourish.

Implicit in the judge’s remarks were broader questions on the anniversary of one of the most tumultuous weeks in Wall Street’s history: What do the giants of finance owe their shareholders and the investing public? And who will adequately oversee these behemoths?

Congress is pondering these issues as it prepares to reshape the power structure of financial regulators in Washington, including the S.E.C. President Obama is pushing lawmakers to pass tougher regulations this year that would touch everything from bonuses to the structural soundness of Wall Street’s most powerful banks, even as some Democrats fret that the health care debate makes it unlikely that financial reform can be achieved.

“We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis,” Mr. Obama said in his speech before several hundred banking executives, lawmakers and Mayor Michael R. Bloomberg of New York.

Such consequences were at the heart of the dispute that came before Judge Rakoff, who had demanded that the S.E.C. and the bank explain which executives were responsible for failing to tell the bank’s shareholders about the payout of Merrill’s bonuses. That information, together with evidence of large undisclosed losses at Merrill, may have led shareholders to reject the merger at a time when the government wanted to forestall a worse meltdown of the financial system.

The judge accused Bank of America and the S.E.C. of concocting the settlement to effectively absolve themselves of further responsibility.

“The S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger,” he wrote, and “the Bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators.”