The New York Times weighs in on an issue that has long vexed the law enforcement and shareholder community: Why make shareholders pay for the sins of their executives? We've seen several cases of this in the wake of the financial crisis.

The latest: Citi has agreed to pay $75 million to settle charges that it misled shareholders about the existence of $40 billion in sub-prime mortgages. Two executives also settled but they paid token sums.

So once again we're in a situation where shareholders must pay, even though they were defrauded. This situation is even more galling when it comes to private shareholders suits--if they win, they get the pleasure of paying themselves. In some cases, insurance will cover the payouts.

Judge Jed Rakoff hit the problem head on when he nixed the Bank of America-SEC settlement in part for this reason. But in the end, he approved a deal--and skirted the issue of a larger settlement. The system is not totally wrong; there may be some deterrent effects. But it would seem wise if more individuals were held accountable. That of course is easier said than done. Is there another way?

For more:
- here's the article

Related Articles:
The big omission in the Goldman Sachs-SEC settlement?
Judge Rakoff accepts Bank of America-SEC deal
More private suits target big Wall Street banks
Feds crackdown on rampant mortgage fraud