This is unfortunate. A federal appeals court overturned Judge Jed Rakoff’s attempt to derail a deal with Citibank, a deal Rakoff had ruled essentially wasn’t in the public’s interest.  It’s a bit complicated.

The full ruling is here. The main issue really boils down to the appeals court looking narrowly at whether Rakoff had abused his authority when he refused to approve a deal between the SEC and Citibank that would have allowed the bank to pay a $285 million fine but not require it to admit to guilt in a scheme to dupe investors in a mortgage deal.

Essentially, the appeals court said the SEC deserved wide discretion, absent any showing of fraud or corruption, in deals it cuts with defendants.

That’s obviously problematic, in one sense. Government bureaucracies have too often ended up captive to the very industries they regulate…how many times do you read that a top government regulator leaves his or her post to take up a lucrative executive job at a company in the industry she or he has just been regulating? Lots.

On the other hand, think of the other scenarios. For example, a federal agency such as the Civil Rights Commission trying to enforce a penalty on a company found to violate an equal rights provision could all of a sudden run into a district judge in an unnamed state who finds the Commission ruling to be too “heavy-handed” or some other euphemism for racism. Then, what do you do?

So, it’s complicated–even as it’s distressing that Citibank, once again, skates.