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SECURITIES AND : EXCHANGE COMMISSION, : Plaintiff-Appellant, : : No. 11-5227 v. : : CITIGROUP GLOBAL MARKETS INC., : Defendant-Appellant : ------------------------------------------------------x
MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT OF THE PUBLIC INTEREST
Akshat Tewary, Esq. 1974 State Route 27 Edison, NJ 08817 (732) 287-0080 Attorney for Amicus Curiae Occupy Wall Street – Alternative Banking Group May 21, 2012
MOTION FOR LEAVE TO FILE AMICUS CURIAE BRIEF IN SUPPORT OF THE PUBLIC INTEREST The Movant, Occupy Wall Street - Alternative Banking Group (“OWSAB”), hereby requests leave, pursuant to Federal Rule of Appellate Procedure 29(b) and this Court’s Local Rule 29.1, to file a brief as amicus curiae in support of the public interest doctrine in this litigation. OWS-AB is a group within the New York-based Occupy Wall Street movement. OWS-AB seeks specific improvements to existing and pending financial services industry legislation and regulations, in addition to evaluating and recommending alternative approaches to banking. OWS-AB also seeks to understand and educate people about the current financial system. OWS-AB files this amicus brief to express its support for Judge Rakoff’s decision to pursue the relevant facts necessary to determine the adequacy of the settlement between the SEC and Citigroup (“NAND settlement”). We agree that the public interest demands that such facts be thoroughly disclosed and examined. As advocates for transparency and education regarding the financial crisis and the financial system, OWS-AB believes that a full review of the facts underlying the case is crucial to the public’s understanding of the current financial environment. In a case that turns on the “public interest,” we urge the Court to consider our viewpoints, which reflect at least some of the opinions of the broader community. 2
OWS-AB has no stake in any of the parties to this litigation or the result of this case, other than an interest in seeking a just and fair development of precedent as to the confirmation of settlements between financial regulators and the nation’s financial institutions.
CONCLUSION For the reasons stated above, the Movant requests that the Court grant this motion and provide standing to file the attached “Proposed Brief Of Amicus Curiae Occupy Wall Street – Alternative Banking Group In Support Of The Public Interest And Against Appellant And Appellee” and any other briefs as may be requested by the Court, including oral argument in this case. Dated: May 21, 2012 Respectfully submitted, /s/ AKSHAT TEWARY 1974 State Route 27, Edison, NJ 08817 (732) 287-0080 Attorney for Amicus Curiae Occupy Wall Street – Alternative Banking Group
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
UNITED STATES SECURITIES AND EXCHANGE COMMISSION,
Plaintiffs-Appellant-Cross Appellee, v.
CITIGROUP GLOBAL MARKETS INC.,
Defendant-Appellee-Cross Appellant. Appeal from the United States District Court for the Southern District of New York in No. 1:11-CV-7387-JSR, Judge Jed S. Rakoff PROPOSED BRIEF OF AMICUS CURIAE OCCUPY WALL STREET – ALTERNATIVE BANKING GROUP IN SUPPORT OF THE PUBLIC INTEREST AND AGAINST APPELLANT AND APPELLEE
1974 State Route 27, Edison, NJ 08817 (732) 287-0080 May 21, 2012 Attorney for Amicus Curiae
TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................. ii CORPORATE DISCLOSURE STATEMENT................................................... iii STATEMENT OF INTEREST OF AMICUS CURIAE.................................... iv SUMMARY OF ARGUMENT.............................................................................. 1 ARGUMENT ........................................................................................................... 2 The Circuit Court Should Dismiss these Appeals on Procedural Grounds ...... 2 The Chevron Doctrine is Inapplicable Here ......................................................... 3 The Circuit Court Must not Undermine a District Court's Ability to Assess the Fairness of a Proposed Settlement’s Underlying Facts ...................... 5 The Fairness Standard Requires an Analysis of the Underlying Facts .........5 The District Court Held that the Fairness Standard Requires a Sufficient Factual Foundation, and not Necessarily Liability .............................6 The Public Interest Militates Against Confirmation of the NAND Settlement 7 The Public Interest Standard is Appropriate .................................................7 The NAND Settlement was not in the Public Interest.....................................7 The NAND Settlement Would Hurt Investors and Undercut the Deterrent Effect of SEC Actions ....................................................................7 The NAND Settlement Would Obscure the Risky Nature of the Products in Question in this Case ..................................................................9 CONCLUSION...................................................................................................... 15
TABLE OF AUTHORITIES CASES Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 34 (1980)…………………. 3 Caitlin v. United States, 324 U.S. 229, 233 (1945)………………………………. 2 Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984)……….………………………………………………… 3, 4, 6 Curtiss-Wright Corp. v. General Electric Co., 466 U.S. 1 (1980)…………….. 5, 6 eBay, Inc v. MercExchange, L.L.C., 547 U.S. 388 (2006)……………………. 5, 7 In re Committee of Asbestos-Related Litigation, 748 F.2d 3 (2d Cir. 1984)……... 2 U.S. Secs. and Exch. Comm’n v. Bank of America Corporation, 653 F. Supp. 2d. 507(S.D.N.Y. 2009)…………………………………………………………..…... 1 U.S. Secs. and Exch. Comm’n v. Citigroup Global Mkts. Inc., No. 11 Civ. 7387, slip op. at 15 (S.D.N.Y. Nov. 28, 2011)............................................... passim STATUTE 28 U.S.C. § 1291 (2011)…………………………………………………………... 2 OTHER AUTHORITIES Nelson D. Schwartz, Bank to Pay $202 Million To Settle Suit On Mortgages, N.Y. Times, May 10, 2012….,………………………………………………………….. 8 Wall Street’s Repeat Violations, Despite Repeated Promises, N.Y. Times, Nov. 7, 2011……………………………………………………………………………….. 8 Yves Smith, ECONned (Palgrave MacMillan 2010)…………………………….. 12
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CORPORATE DISCLOSURE STATEMENT Pursuant to Federal Rules of Appellate Procedure 26.1 and 29, the Occupy Wall Street – Alternative Banking Group hereby states that it is not a corporation, but rather an unincorporated association of individual members, and that therefore: 1. It has no parent corporation. 2. There is no publicly held corporation that owns 10% of more of the association.
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STATEMENT OF INTEREST OF AMICUS CURIAE Alternative Banking (“OWS-AB”) is a group within the New York-based Occupy Wall Street movement.1 OWS-AB seeks specific improvements to existing and pending financial services industry legislation and regulations, in addition to evaluating and recommending alternative approaches to banking. OWS-AB also seeks to understand and educate people about the current financial system. OWS-AB files this amicus brief to express its support for Judge Rakoff’s decision to obtain the facts necessary to determine the adequacy of the settlement between the SEC and Citigroup (“NAND settlement”). We agree that the public interest demands that such facts be thoroughly disclosed and examined. As advocates for transparency and education regarding the financial crisis and the financial system, OWS-AB believes that a full review of the facts underlying the case is crucial to the public’s understanding of the current financial environment. In a case that turns on the “public interest,” we urge the Court to consider our viewpoint, which reflect at least some of the opinions of broader community
No part of this brief was authored by counsel for any party, person, or organization besides amicus. No party, person, or organization contributed money to the preparation or submission of this brief. – iv –
OWS-AB has no stake in any of the parties to this litigation or the result of this case, other than an interest in seeking a just and fair development of precedent as to the confirmation of settlements between financial regulators and the nation’s financial institutions. This brief is filed in conjunction with a Motion to Leave to File an Amicus Brief pursuant to Federal Rule of Appellate Procedure 29(b).
SUMMARY OF ARGUMENT This case relates to S.D.N.Y. Judge Jed Rakoff’s withholding of his injunctive imprimatur on a proposed consent judgment between Citigroup and the SEC (“NAND settlement”) absent a sufficient demonstration of facts. U.S. Secs. and Exch. Comm’n v. Citigroup Global Mkts. Inc., No. 11 Civ. 7387, slip op. at 15 (S.D.N.Y. Nov. 28, 2011) [hereinafter Rakoff Opinion]. A chief concern for Judge Rakoff was that under the NAND settlement, Citigroup neither admitted nor denied any culpability. This brief's primary goal is to demonstrate that a full examination of the facts underlying this case, including the broader impact of the actions of the parties on the financial crisis and the economy, is a necessary condition for the granting of injunctive relief. In adjudicating a motion for injunctive confirmation of a proposed settlement, a court must consider whether the settlement is fair, reasonable, and in the public interest. U.S. Secs. and Exch. Comm’n v. Bank of America Corporation, 653 F. Supp. 2d. 507, 508 (S.D.N.Y. 2009). In their briefs, Citigroup and the SEC have mischaracterized the central issue in this case as whether the District Court was correct in demanding an absolute admission of liability as a necessary condition to confirmation, in an attempt to destroy the hallowed practice of settlement-by-consent-decree. In reality, this case is simply about whether a district court has the authority to –1–
demand the adequate production of facts to assess how a proposed consent order would affect the public interest. A district court does have that authority, which renders these appeals unripe for review. Further, even if the Court accepts review, the egregious factual circumstances underlying this case militate against judicial confirmation of the NAND settlement between Citigroup and the SEC. ARGUMENT I. THE CIRCUIT COURT SHOULD DISMISS THESE APPEALS ON PROCEDURAL GROUNDS The main issue before the court is a factual one: did Citigroup and the SEC provide sufficient information to merit a confirmation of the NAND settlement under the applicable (and largely uncontested) standards for injunctions. This Court has recognized that “interlocutory appeals of essentially factual questions are especially disfavored.” In re Committee of Asbestos-Related Litigation, 748 F.2d 3, 5 (2d Cir. 1984). This standard would suggest that the interlocutory appeals of Appellant and Cross-Appellant are premature. Interlocutory appeals are furthermore restricted to “final decisions of the district courts.” 28 U.S.C. § 1291 (2011). “A ‘final decision’ is generally one that ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Caitlin v. United States, 324 U.S. 229, 233 (1945). In this case, the merits of the NAND settlement have not been conclusively addressed by the
district court. In fact, Judge Rakoff scheduled a trial on July 16, 2012 for that very purpose. Granting interlocutory appeals in this case would allow these Appellants (and other appellants in future cases) to circumvent the normal appeals process. The SEC’s petition for a writ of mandamus is likewise inappropriate. “The remedy of mandamus is a drastic one, to be invoked only in extraordinary situations” involving gross abuses of discretion. Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 34 (1980). It is hard to argue that an abuse of discretion has occurred when the district court has not even issued a final decision. Accordingly, the instant appeals should be denied and the case should be remanded back to district court for trial on the merits. II. THE CHEVRON DOCTRINE IS INAPPLICABLE HERE In its order granting a stay of the district court proceeding (“Stay Order”), this Court suggested that Judge Rakoff failed to show deference to the Commission’s decision to settle for the NAND consent judgment. (Stay Order at 9.) The Chevron doctrine indicates that a reviewing court should avoid substituting its judgment for that of a federal agency, particularly with respect to discretionary and policy-based matters. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 866 (1984). This Court concluded that Judge Rakoff had substituted his own judgment on the merits of the NAND settlement for that of the Commission. Id. –3–
We believe that conclusion was erroneous. Chevron deference may have applied had Judge Rakoff conclusively ruled on whether the NAND settlement was good policy. However, he did not reach such a conclusion. The Rakoff Opinion simply found that the standards for an injunction (which include a public policy component) had not been met, (Rakoff Opinion at 8), while the ultimate issue of the consent judgment’s merits, and the reasonableness of such a judgment, were to be addressed at trial at the district court level. Id. at 15. In fact, in Chevron, the Supreme Court expressly noted that it is within the purview of a court to determine whether an agency’s choice of outcome is a reasonable one. Chevron, 467 U.S. at 843. Judge Rakoff has not been given an adequate opportunity to make that reasonableness inquiry. The Rakoff Opinion, at its core, was a simple statement that more facts were needed, and that a trial was necessary to address that need. The appropriateness of granting an injunction is a judicial function that is clearly out of the purview of federal agencies. We do not believe that Chevron can be construed to require the judicial branch to grant injunctions indiscriminately whenever a federal agency wishes to include such provisions in a settlement. Further, Chevron does not obviate a district court judge's power to demand more facts. Chevron might have applied had Judge Rakoff’s order invalidated the consent judgment outright, but that hypothetical case is not before this Court.
THE CIRCUIT COURT MUST NOT UNDERMINE A DISTRICT COURT’S ABILITY TO ASSESS THE FAIRNESS OF A PROPOSED SETTLEMENT’S UNDERLYING FACTS A. The Fairness Standard Requires an Analysis of the Underlying Facts Judge Rakoff determined that a trial was required to assess whether the facts
surrounding the proposed consent judgment met the “fairness” standard for injunctive relief. The Stay Order took issue with this determination, suggesting that a trial was not required since “the court was free to assess the available evidence [at the motion stage itself] and to ask the parties for guidance as to how the evidence supported the proposed consent judgment.” (Stay Order at 11). However, Judge Rakoff did “ask the parties for guidance as to . . . the evidence,” by ordering a trial. Moreover, as confirmed by the Supreme Court in eBay, Inc v. MercExchange, L.L.C., 547 U.S. 388 (2006), judges must consider the fairness of a settlement to non-party stakeholders and the public interest, and it appears that Judge Rakoff found the evidence provided at the motion stage to be inadequate to assess this question properly. The Stay Order, by declaring the evidence supplied sufficient, effectively substituted its own judgment for that of the district court. However, by doing so, it ignored the normal demarcation of authority between district and appellate courts. The discretionary judgment of the district court should be given substantial deference as to factual issues. Curtiss-Wright Corp. v. General Electric Co., 466 –5–
U.S. 1, 10 100 S. Ct. 1460, 1466 (1980). If Judge Rakoff decided that a trial was necessary to gather sufficient factual evidence to properly assess the actual fairness of the settlement, that decision should not be second-guessed. The SEC and Citigroup wish to have their cake and eat it too: they ask this Circuit to deny Judge Rakoff the requisite deference as a fact-finder, while concomitantly insisting on the granting of deference to the Commission under the inapplicable Chevron standard. The Rakoff Opinion posits that the judicial branch cannot assess the fairness of an injunction to defendants without having some assurance of whether or not the allegations have any basis in fact. (Rakoff Opinion at 9.) Against this point, the Stay Order argues that in this particular case, Citigroup is a sophisticated litigant that freely consented to the settlement. (Stay Order at 10.) However, we suggest
to the Court that this decision may have significant precedential force. Similar cases in the future may involve less sophisticated litigants, and judges should be permitted to require a thorough factual review to safeguard their interests. B. The District Court Held that the Fairness Standard Requires a Sufficient Factual Foundation, and not Necessarily Liability The Stay Order appeared to misconstrue Judge Rakoff’s decision to mean that a court can never approve a settlement that represents a compromise. Id. at 12. In actuality, his decision simply denied the request for immediate confirmation because of an insufficient factual record. (Rakoff Opinion at 4.) The decision did
suggest that the settlement seemed inappropriate, but delayed a final ruling on the issue until after trial. Id. at 15. Thus, in proclaiming that Judge Rakoff’s decision would obviate the possibility of compromise, the Stay Order overstates the breadth of the lower court decision. IV. THE PUBLIC INTEREST MILITATES AGAINST CONFIRMATION OF THE NAND SETTLEMENT A. The Public Interest Standard is Appropriate The Supreme Court has confirmed that the public interest must not be “disserved by a permanent injunction.” eBay, 547 U.S. at 391. Thus, Judge Rakoff was entirely justified in considering the public interest in his Decision. The Stay Order itself confirms that deference to federal agencies does not require a court to “rubber stamp all arguments made by such an agency.” (Stay Order at 16.) B. The NAND Settlement was not in the Public Interest If this Court fails to dismiss these appeals on procedural grounds, it should nevertheless hold that the public interest standard was not met, thereby rendering injunctive confirmation of the NAND settlement inappropriate. 1. The NAND Settlement Would Hurt Investors and Undercut the Deterrent Effect of SEC Actions
For various reasons, financial regulators are loath to pursue criminal indictments for misconduct. If regulators resort instead to the option of civil suits, then at the very least they should impose sanctions that have “bite,” in order to –7–
effectively deter misconduct. Unfortunately, the settlement here, and NAND settlements generally, fail to achieve this end. Picayune monetary settlements like the $285 million wrist-slap presented here fail to provide punishment sufficient to deter similar conduct in the future. Typically, an injunctive order supporting an NAND settlement is an empty promise to “obey the law next time” and is rarely enforced. Not surprisingly, an analysis by the New York Times found that in the last 15 years, there have been a minimum of 51 violations of these agreements by major financial firms. Wall Street’s Repeat Violations, Despite Repeated Promises, N.Y. Times, Nov. 7, 2011, available at http://tinyurl.com/84unp8e. Citigroup, with six violations, is one of the top recidivists. See id. Another option available to the SEC is requiring defendants to make meaningful admissions. Earlier this year, for instance, Deutsche Bank admitted in a $202 million settlement with HUD that it lied about the eligibility of loans for Federal mortgage insurance and repeatedly submitted certificates that were knowingly or recklessly false. Nelson D. Schwartz, Bank to Pay $202 Million To Settle Suit On Mortgages, N.Y. Times, May 10, 2012. It seems that the SEC has inhibitions not shared by other regulators. Specifically, the Commission appears to have the view that requiring misbehaving entities to admit to wrongdoing is unduly harsh because that could facilitate private lawsuits. It is puzzling that the SEC is so exercised about the risk that private parties will become better informed about –8–
inappropriate behavior by regulated firms, or the risk that private parties might consequently find it easier to seek redress when they are injured by such firms. The benefits to Citigroup (avoidance of civil liability) and the SEC (reduced workload) from this NAND settlement are clear, but the benefit to the public is not. The NAND settlement is a private agreement that has no collateral estoppel effects for investors seeking damages from Citigroup’s actions. Thus, those investors must relitigate the very issues already before the Court, leading to needless cost and the expenditure of spare judicial resources. Further, the SEC has admitted that it may not pass any of the $285 million to investors who suffered losses. The SEC’s interest is to settle this case quickly in order to reduce its workload, given its limited resources. However, the public’s interest goes well beyond the SEC’s costs. The public has a stake in obtaining a) full transparency as to the specifics of this case, and b) punishment sufficient to deter abusive conduct in the future. Thus, the SEC is an imperfect proponent of the public interest, and its assertions that it represents that interest must be viewed skeptically. 2. This NAND Settlement Would Obscure the Risky Nature of the Products in Question in this Case
The global financial crisis has caused untold damage since its onset four years ago. To the extent that this crisis was caused by culpable behavior, as
opposed to simple accidents, there is a clear public interest in identifying such behavior and in holding violators accountable in a meaningful way. We believe that the behavior highlighted in this case was not only destructive, but also was the tip of an iceberg of similarly destructive behavior. This NAND settlement forecloses any chance of shedding light on such behavior – and since this case was seen as particularly egregious, the SEC’s failure to reach solid conclusions about culpability here can be seen as emblematic of a general refusal to pursue the public’s interest in information and accountability. The type of instrument at the core of this case has done far more extensive damage than suggested in any SEC filing to date. The instrument in question was a particular type of collateralized debt obligation (“CDO”). Expertise in CDOs is held among relatively few individuals, the overwhelming majority of whom want to continue to be employed within the financial services industry and therefore keep market practices to themselves. The Citigroup CDO at issue in this case is paradigmatic of the most destructive aspects of these transactions. The SEC’s complaint and its related filing against Citigroup employee Brian H. Stoker identify some of the problems, but by no means all of them. One such issue was highlighted in Judge Rakoff’s ruling. Citigroup intended to use the CDO as a vehicle for unloading on investors a hand-picked set – 10 –
of assets that was expected to deteriorate. (Rakoff Opinion at 2.) The CDO was run by a firm (a “CDO manager”) that was presented to investors as exercising independent judgment. E-mails cited in the Stoker complaint show that Citigroup recognized that investors would not have been interested in the deal if they thought that the CDO manager, far from being independent, was actually (per allegations in the complaint) colluding with Citigroup to fill the CDO with assets likely to fail. The SEC filing also mentions that Citigroup placed $92.5 million of risky tranches from its own CDOs into the CDO at issue. In this way, Citigroup avoided significant losses on these securities. However, the SEC appears to miss the significance of this point, and provides no indication that it included this avoidance of losses in its computation of Citigroup’s “profits” from the deal. This fact raises further questions about the adequacy of the settlement agreed to by the SEC. The SEC filing clearly describes a relationship (between Citigroup and the CDO manager) that was less than arm’s length, and depicts this situation as an industry practice. The clear implication is that this sort of misrepresentation was pervasive. However, the SEC does not appear to have thought much about what the systemic effects of these misrepresentations might be. Misrepresentations about securities’ values distort market signals. In this case, the effects were devastating. Most subprime loans were not retained by originators, but were sold into securitizations, which in turn issued various classes – 11 –
of securities, or “tranches” with varying protections against losses on the underlying mortgage loan collateral. See generally, Yves Smith, ECONned (Palgrave MacMillan 2010). The riskiest tranche, known as the BBB or BBBtranche, was most difficult to sell. Since investment banks did not want to retain it, investor refusal to buy it would constrain demand. Prior to the financial crisis, BBB tranches were placed increasingly into CDOs, in which 65% to 75% of the value of the deal would be rated AAA, making it easier to sell to investors. The creation of a single CDO, by “disposing” of a significant quantity of hard-to-sell BBB tranches of subprime bonds, therefore made possible the creation of a much larger quantity of subprime bonds, and hence also of subprime mortgages. The widespread use of CDOs sustained the housing market for a time, but traditional AAA buyers began to back off starting in 2004. Such a drop in demand would normally have led to a retrenchment in the housing market, causing the housing bubble to burst at a point where it still had not reached enormous proportions. However, the desire by investment banks to prop up the lucrative CDO market led instead to a new “innovation:” “synthetic CDOs.” Synthetic CDOs could be created without a full complement of underlying subprime housing loans. The place of subprime loans within the structure was partly taken by investors trying to short the housing market (through the technical device of credit default swaps (“CDS”)). As time passed, more and more CDOs – 12 –
were expressly created to satisfy the requests of these short investors, and were consequently packed (with the help of the investment banks and CDO managers) with the riskiest subprime bonds. Investors were simply told that these CDOs were faster to tee up than conventional CDOs, but were otherwise the same. The fact that these CDOs were being created to satisfy the appetite of the shorts, and would therefore contain the worst BBB exposures, was typically withheld from investors. This artificially-increased demand for CDOs translated into lower, more aggressive bids for the underlying mortgage bonds, which lowered mortgage rates and in turn increased demand for the origination of more mortgage loans. The 2004 decline in mortgage origination reversed, and volumes rose in 2005. In the second half of that year, demand for the very worst mortgages increased dramatically. As time went on, the increasing size of the bubble made it certain that what would have been a minor, if somewhat painful, adjustment in the housing market would instead grow into a global financial crisis. Many details of what actually happened remain in darkness. The SEC found an important piece of the puzzle in its 2010 lawsuit concerning a Goldman synthetic CDO. This “Abacus” CDO was used by Goldman to bet against subprime mortgages more cheaply than if Goldman had had to do so overtly. Unfortunately, Goldman and the SEC settled the litigation, effectively halting a full probe of the 25 CDOs in the Abacus program. – 13 –
This sad history of regulatory forbearance repeats itself here. The Citigroup CDO at issue in this case was a “hybrid” – this meant that the CDO included cash bonds, and simultaneously made it possible (through CDS) to bet against the housing market. The fact that the security was also a “CDO squared” meant that it was a repackaging of approximately sixty bonds issued by other CDOs, which in turn were backed by fifty to one hundred tranches of MBS bonds, making the leverage on the mortgage market even greater. It appears that this single CDO transaction was backed by approximately three thousand MBS bonds which, by a conservative estimate, were backed by approximately fifteen hundred MBS transactions. Each MBS transaction contained, on average, over two thousand mortgage loans, with an average balance of approximately $160,000. Therefore, in aggregate, the Class V Funding III transaction referenced approximately three million subprime mortgage loans with an aggregate balance of around five hundred billion dollars. Thus, by allegedly creating the transaction for the purpose of subsequently shorting it, Citigroup helped create demand for more CDO and MBS bonds, which, in turn, fueled demand for a massive amount of additional subprime mortgage loans at a time when the market for such loans should have been cooling. Consequently, the public damage caused by CDO vehicles such as Class V Funding III greatly exceeded the monetary losses incurred by investors in these bonds. – 14 –
Obscurity surrounding the CDO market has persisted, despite its gargantuan size. This obscurity has helped to undermine important reforms of housing finance. For instance, in 2011 the FDIC proposed securitization reforms which included a ban on resecuritizations (in practice, on CDOs). Public ignorance about the role of CDOs in the housing bubble made it easier for banks to oppose this initiative successfully. The NAND settlement here enables the continuance of this collective ignorance, to the severe detriment of the public interest. If there is no public interest in examining the behavior at the heart of the current financial crisis (which has imposed tremendous costs not just on investors in affected deals but on innocent bystanders worldwide through unemployment, austerity, and lower global growth), then nothing meets this standard. If this Court refuses to send this case to trial, it will have abdicated the role of the judiciary. CONCLUSION For the reasons stated above, the merits panel should remand this case for consideration of the factual circumstances surrounding the NAND Settlement. Dated: May 21, 2012 Respectfully submitted, /s/ AKSHAT TEWARY 1974 State Route 27, Edison, NJ 08817 (732) 287-0080 Attorney for Amicus Curiae Occupy Wall Street – Alternative Banking Group
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CERTIFICATE OF SERVICE I, Akshat Tewary, hereby certify that on May 21, 2012, I caused the foregoing “Proposed Brief of Amicus Curiae Occupy Wall Street – Alternative Banking Group” to be sent as directed by email to email@example.com, and sent by email to counsel for each of the parties, as follows: Counsel for Plaintiff/Appellant/Cross-Appellee SEC Michael A. Conley Jeffrey A. Berger Securities and Exchange Commission 100 F Street, NE Washington, DC 20549-4010 Tel: 202-551-5127/202-551-5112 Fax: 202-722-9362 Email: firstname.lastname@example.org, email@example.com Counsel for Defendant/Appellee/Cross-Appellant Citigroup Global Markets Inc. Brad Scott Karp Paul, Weiss, Rifkind, Wharton & Garrison LLP (NY) 1285 Avenue of the Americas New York, NY 10019 Tel: 212-373-2384 Fax: 212-373-2384 Email: firstname.lastname@example.org Counsel for Judge Rakoff John Wing Lankler Siffert & Wohl LLP 500 Fifth Ave 33rd Floor New York, NY 10110 Tel: 212-921-8399 Fax: 212-764-3701 Email: email@example.com __/s/____________________ Akshat Tewary
CERTIFICATE OF COMPLIANCE This brief complies with the type-volume limitation of Federal Rule of Appellate Procedure 29(d) and 32(a)(7)(B) and Fed. Cir. Rule 32(b). The brief contains 3533 words, excluding the parts of the brief exempted by Federal Rule of Appellate Procedure 32(a)(7)(B)(iii). This brief complies with the typeface requirements of Federal Rule of Appellate Procedure 32(a)(5) and the type style requirements of Federal Rule of Appellate Procedure 32(a)(6). The brief has been prepared in a proportionally spaced typeface using Microsoft Word in 14-point Times New Roman font. Dated: May 21, 2012 Respectfully submitted, /s/ Akshat Tewary, Esq. 1974 State Route 27 Edison, NJ 08817 Attorney for Amicus Curiae Occupy Wall Street – Alternative Banking Group
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