Looks like Mary Schapiro's attempt to curry favor with some disenfranchised people who still don't grasp the SEC for the conflicted "regulatory" mess it has become may end up being very short sighted. At today's hearing Judge Jed Rakoff, whom Zero Hedge wrote about previously, is in no rush to steamroll this particular "settlement" down the throats of investors. From Bloomberg:

The hearing, held in New York before U.S. District Judge Jed Rakoff, ended with Rakoff saying he needs more information on the Aug. 3 accord between the bank and the U.S. Securities and Exchange Commission, which filed the suit. The settlement won’t be final unless Rakoff approves it.

Rakoff said that if the SEC is right that Bank of America lied about whether to pay the bonuses then the proposed settlement is not “remotely reasonable.”

“Don’t I need to know what the truth is to make a determination?” Rakoff asked. If Bank of America broke the law by not disclosing the bonuses, “is there not something strangely askew in a fine of $33 million” given the size of the deal, Rakoff said.

If BAC is right and they didn’t hide the bonus information then Rakoff said he could see how the settlement “might be approvable” on the theory that they want to take $33 million, as long as it’s nongovernment money, to get rid of the litigation.

“It seems to me that I need a lot more material from the parties before I can assess whether this is a fair and reasonable settlement,” Rakoff said. “There are important legal issues that have been glanced at here but need to be briefed.”

“I would be less than candid if I didn’t express my continued misgivings about this settlement at this stage,” Rakoff said. “When this settlement first came to me it seemed to me to be lacking, for lack of a better word, in transparency. I did not know much about the facts from the complaint. I did not know much, or really anything, about the basis for the settlement.”

But then again, from numerous prior congressional hearings in which Ken Lewis personally has testified and used the fancy word "commingled" repeatedly, there is no way to keep track of what money is the government's and what money is the bank's.

Rakoff demonstrated some apt cynicism with some earlier questioning, trying to determine who was responsible for the bonus payment:

“Was it some sort of ghost?” Rakoff asked today. “Who were the people? Mr. Thain and Mr. Lewis would seem to be responsible, yes?”

“If they would not have paid out $3.6 billion, they would have had a loss of $3.6 billion less, no?” the judge said, referring to Merrill.

and this

[BofA lawyer Lewis] Liman said of the total $3.6 billion in bonuses, Merrill was contractually obligated to pay $850 million. The rest was paid to 39,000 employees, for an average of $91,000, which was “not a lot of money,” Liman said.

“I’m glad you think $91,000 is not a lot of money,” Rakoff replied. “I wish the average American was making anywhere near $91,000.”

Zero Hedge applauds (for the time being) this Judge's seemingly earnest desire to get transparency to the surface over Mary Schapiro's less than inspired attempt to shroud the whole matter with the pretense of settlement. The question again is at what point will the CEO of Bank Of America finally be shown the door? How many such comparable gross judgments of error (granted they were with other people's money) will Lewis have to perform before his board finally stop sucking at his proverbial teat. Maybe Rakoff should make finally make a Lewis ouster as the minimum condition for any settlement, even with an organization as ineffectual and as conflicted as the SEC.