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As President Obama spoke on Wall Street about the urgent need for tighter financial regulation, a federal judge issued a scathing ruling about how poorly regulators at the Securities and Exchange Commission have been doing their job.
The judge rejected a $33 million settlement between the SEC and Bank of America, saying the SEC's accusations of inadequate disclosure by the bank over bonuses paid at Merrill Lynch must now go to trial.
The $33 million fine represents only one percent of the amount of bonuses paid to Merrill Lynch executives.
Louise Story, Wall Street and finance reporter for the "New York Times" had been following the story for over a month.
She characterized the judge's ruling as scathing, "He said this settlement between the SEC and Bank of America was a contrivance. He said that basically, it was a way for the SEC to claim that it was exposing wrong-doing, while the bank could claim that this was overzealous regulators. But he said in fact, that was really hiding the truth of the matter."
Story said she wasn't surprised by the ruling, considering what she witnessed at a hearing early on, "In the hearing just over a month ago when the SEC presented the settlement with Bank of America to the judge, it was striking because the judge would ask the SEC basic factual questions about the merger, and the SEC wouldn't know the answers, and Bank of America's lawyers kept going up and whispering the answers to the SEC right in front of us!"
Since then, according to Story, the judge asked the two parties to file a series of documents to give him answers on who made the decisions not to tell shareholders about Merrill Lynch's bonuses, which they failed to do.
If the case goes to trail, it will be a precedent-setting case in terms of shareholder rights and the role of the SEC.
Story believes it's another blow to the SEC, "A lot of people feel that the SEC slipped up on its job of investor protection, as well as its job of watching the investment banks getting into the financial crisis. In Washington right now everyone's talking about what powers different regulators should have, so certainly the SEC's reputation is on the line."
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