District Judge Challenges SEC Settlement System As More "Half-Baked Justice" Hot

Citi agreed to pay $285 million -- including the fine -- to settle SEC complaints that its managers profited by shorting a $1 billion fixed income portfolio that they themselves had stuffed with mortgage-backed paper.

However, District Judge Jed Rakoff isn't happy with the way the settlement fails to acknowledge wrongdoing or systemic fraud within Citi's culture.

He's also upset with how Citi shareholders -- and not the extremely highly compensated employees involved -- will ultimately shoulder the loss.

Finally, he wonders why the dollar amounts here seem arbitrary compared to much higher fines imposed on firms like Goldman Sachs in the past.

These are good questions. The SEC says it's got good answers. We'll just have to see.

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