In the Bank of America Merrill Lynch bonus imbroglio, the SEC has proposed a settlement in which, once again, the defendants neither admit nor deny wrongdoing.

Once again, the corporation would pick up the fine while responsible individuals escape uninjured. And once again, the public would be left wondering what actually happened. This isn't justice, nor will it deter fraud.

These were the frustrations expressed by Judge Jed Rakoff in court yesterday. He refused to approve the settlement because he wants to know the truth: Who was responsible for misleading shareholders, and how did they settle on a fine of $33 million?

He told both sides to return to court with more details in two weeks. For the public's sake, it's a good thing he did.

In this case, it isn't just shareholder's money at stake. It's taxpayers'. Our bail-out cash saved the bank, and we deserve to know what went on.

What the judge can accomplish isn't clear. But the simple exercise of forcing the SEC to provide more details of its case would be very valuable.

The SEC's eagerness to settle without naming names is particularly frustrating. It insists Bank of America, not executives, misled shareholders about Merrill bonuses by deliberately omitting relevant documents from its public filings.

But corporations don't mislead, people do. And if shareholders were injured, why are they the ones paying the $33 million fine?

"It's very easy to plea-bargain with shareholders' money," says Columbia law professor John Coffee. It's a shame when the SEC allows them to.

A big problem is that the SEC needs to rethink its definition of success. A drive-by settlement that collects a token payment for fraudulent behavior which the other side neither admits nor denies accomplishes nothing.

Except, perhaps, leaving Bank of America CEO Ken Lewis and colleagues off the hook. They'd obviously prefer the matter went away, not least because more disclosure will provide fodder for private lawyers targeting their bank.

But as Georgetown law professor Donald Langevoort put it to me: "If people remain wealthy after they have engineered a fraud because of the way a settlement is structured, then neither justice nor deterrence is accomplished."

To be fair, the SEC needs a much bigger litigation budget to go after the likes of Bank of America. But even so it has to be more willing to go to the mat in important cases like this, where it isn't just shareholders' money at stake. It's ours.

– James Pethokoukis is a Reuters columnist. The views expressed are his own –

Ben Bernanke’s testimony to Congress about his involvement in the Bank of America-Merrill Lynch merger was a lot like an FOMC statement: short and unadorned, yet open to much interpretation.

When the Federal Reserve chairman wasn’t repeatedly saying “I don’t remember” or “I don’t recollect,” he was matter-of-factly stating that he didn’t intend to threaten Bank of America CEO Ken Lewis with termination if he didn’t go through with the Merrill deal.

Yet both Republicans (all) and Democrats (some) seemed astonished that Bernanke wouldn’t admit that having the Fed outline all the negative repercussions of invoking the “material adverse change” clause to escape the Merrill deal was a de facto threat to BofA management.

Whether or not Bernanke actually believed his script was impossible to prove, since the Republicans, particularly Representative Darrell Issa of California, didn’t have evidence that Bernanke did intend to directly threaten Lewis.

It was Issa who said on television that Bernanke was engaged in a “cover-up” to disguise his actions in pushing the merger. Great claims require great proof. And Issa didn’t have great proof, just a bit of hearsay.

Yes, there was an email showing that Richmond Federal Reserve President Jeffrey Lacker claimed he told Lewis, after having a long talk with Bernanke, that BofA management was “gone” if it played the MAC threat. But Bernanke said that was a misinterpretation of his chat with Lacker.

So unless there is a transcript of the Lacker-Bernanke chat floating around somewhere, a dead end has been reached. Issa clearly overplayed his hand if what he actually meant to prove was that an outright deception had taken place. (Even if he had a smoking gun and Bernanke was somehow forced to resign, Issa would probably not like Fed Chairman Lawrence Summers any better.)

Then again, perhaps what the Republicans were actually trying to do was to paint Bernanke as an enabler of President Obama’s supposed big government policies. There has been a conservative backlash against the notion of the Fed operating as a “systemic risk” regulator that could serve as a catalyst for government takeovers of financial institutions — or bullying them, as the GOP charged Bernanke with doing in this case.

Of course, another criticism of the Fed as super-regulator would be that such a role would overly politicize the central bank. Indeed, it did seem weird that after grilling Bernanke for three hours and implying that he was lying, one Republican offered up a question about M2 and monetary policy.

Perhaps the one bit of evidence that did come out of the Bernanke interrogation was that having the Fed regulate banks and conduct monetary policy is a bad idea if you care about central bank independence.

For more on politics and the economy, check out James Pethokoukis’ blog at http://blogs.reuters.com/james-pethokoukis/

You have to marvel at the seemingly Midas touch of Larry Fink.

The BlackRock Inc. chief executive avoided taking over the helm of Merrill Lynch -- something John Thain probably wishes he had done. Fink's firm emerged from the financial crisis as the Federal Reserve's favorite private money manager, with BlackRock getting the lion's share of the government's work for managing troubled assets. And the $13 billion deal Fink just reached with Barclays Global Investors has turned BlackRock into the outright titan of the asset management world with $2.7 trillion in other peoples' money under management.

It's often been said Jamie Dimon is the new king of Wall Street. But one can argue that the 56-year-old Fink, who started BlackRock as a small bond investment shop two decades ago, can also rightfully lay claim to that honor. Even as the Obama administration is about to announce its plan for managing so-called "too big to fail" financial institutions, Fink's BlackRock is getting bigger and more consequential than ever.

The deal puts BlackRock's fingers firmly into every significant asset class-corporate bonds, mortgage-backed securities, mutual funds, stocks, cash, hedge funds and now the ever popular exchange traded funds -- a stock index-like security. Barclays now joins Bank of America and PNC Financial in having major equity stakes in BlackRock and a vested interest in the money manager's long-term health.

The danger, of course, in creating a money management firm the size of BlackRock is that it puts a lot of people's retirements at risk if the firm were to collapse, or its investment funds were to implode. To put BlackRock's size in perspective, it's now bigger than the combined assets managed by mutual fund giant Fidelity Investments and the entire hedge fund industry.

Wall Street historian Charles Geisst says money managers traditionally have not posed the same kind of risk to the financial system as a commercial bank or investment. But Geisst worries whether Wall Street is laying the groundwork for a new kind of systemic risk, if the BlackRock deal with Barclays encourages a consolidation of too much pension and retirement money into the hands of just a few players. "We could have big problems with these huge asset managers down the road," he says.

To be sure, BlackRock is not too big to fail in the way that phrase came to be used during the current crisis. The firm is not a primary lender to other institutions and BlackRock is not widely leveraging its own balance sheet to fund its operations. The firm has just $1 billion in debt on its balance sheet. More significant, the investments that BlackRock manages aren't insured by the federal government -- so a collapse of its many investment vehicles wouldn't require any direct payout by taxpayers. And it's hard to imagine all of BlackRock's many funds going south at the same time.

Still, it's worth remembering that no money manager always has the golden touch. Consider the case of Anthracite Capital, a commercial mortgage-focused real estate investment trust (REIT) that is teetering, and which long has been tied to both Fink and BlackRock.

Last year, Anthracite shelled-out about $24 million in management fees to BlackRock. In March, Anthracite's auditors officially voiced doubt about Anthracite's ability to survive as a "going concern", although it has since renegotiated some of its credit lines. The shares are trading around 80 cents -- down from $8 a year ago. Anthracite hasn't paid a dividend to most shareholders since the end of 2008.

Anthracite, meanwhile, owes its very existence to BlackRock. Back when BlackRock was still a subsidiary of PNC, it took Anthracite public in 1998 with Fink as the REIT's first chairman. Trying to decipher the many related party transactions between the two firms is enough to give you a headache. But suffice to say, the connections between the two financial firms are substantial.

Over the years, BlackRock has relied on Anthracite to provide $150 million in equity capital for two separate real estate funds Fink's firm manages, and BlackRock also is one of the REIT's main financiers.

Now if Anthracite were to go bust, the impact on BlackRock wouldn't be immense. (BlackRock declined to comment.) But the firm would be forced to take a write-down on the lost management fees, its remaining equity stake in Anthracite and the roughly $30 million in loans it has extended to Anthracite.

But the more significant impact might be to Fink's reputation. For Anthracite's collapse could come just as he is reaching for his share of the Wall Street crown.